Correlation Between CMC Investment and HVC Investment

Can any of the company-specific risk be diversified away by investing in both CMC Investment and HVC Investment at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CMC Investment and HVC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CMC Investment JSC and HVC Investment and, you can compare the effects of market volatilities on CMC Investment and HVC Investment and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CMC Investment with a short position of HVC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Investment and HVC Investment.

Diversification Opportunities for CMC Investment and HVC Investment

-0.38

Correlation Coefficient

CMC Investment  HVC Investment

Very good diversification

The 3 months correlation between CMC and HVC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding CMC Investment JSC and HVC Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HVC Investment and CMC Investment is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CMC Investment JSC are associated (or correlated) with HVC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HVC Investment has no effect on the direction of CMC Investment i.e., CMC Investment and HVC Investment go up and down completely randomly.

Pair Corralation between CMC Investment and HVC Investment

Assuming the 90 days trading horizon CMC Investment is expected to generate 2.01 times less return on investment than HVC Investment. In addition to that, CMC Investment is 1.78 times more volatile than HVC Investment and. It trades about 0.1 of its total potential returns per unit of risk. HVC Investment and is currently generating about 0.37 per unit of volatility. If you would invest  807,144  in HVC Investment and on September 28, 2024 and sell it today you would earn a total of  182,856  from holding HVC Investment and or generate 22.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.64%
Values	Daily Returns

CMC Investment JSC  vs.  HVC Investment and

CMC Investment JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CMC Investment JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, CMC Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

HVC Investment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HVC Investment and are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, HVC Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMC Investment and HVC Investment

The main advantage of trading using opposite CMC Investment and HVC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Investment position performs unexpectedly, HVC Investment can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HVC Investment will offset losses from the drop in HVC Investment's long position.

The idea behind CMC Investment JSC and HVC Investment and pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.