Correlation Between CMC Investment and Sea Air

Can any of the company-specific risk be diversified away by investing in both CMC Investment and Sea Air 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 Sea Air 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 Sea Air Freight, you can compare the effects of market volatilities on CMC Investment and Sea Air 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 Sea Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Investment and Sea Air.

Diversification Opportunities for CMC Investment and Sea Air

0.47

Correlation Coefficient

CMC Investment  Sea Air

Very weak diversification

The 3 months correlation between CMC and Sea is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding CMC Investment JSC and Sea Air Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Air Freight 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 Sea Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Air Freight has no effect on the direction of CMC Investment i.e., CMC Investment and Sea Air go up and down completely randomly.

Pair Corralation between CMC Investment and Sea Air

Assuming the 90 days trading horizon CMC Investment JSC is expected to under-perform the Sea Air. In addition to that, CMC Investment is 2.49 times more volatile than Sea Air Freight. It trades about -0.05 of its total potential returns per unit of risk. Sea Air Freight is currently generating about -0.04 per unit of volatility. If you would invest  3,150,000  in Sea Air Freight on September 29, 2024 and sell it today you would lose (150,000) from holding Sea Air Freight or give up 4.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	70.91%
Values	Daily Returns

CMC Investment JSC  vs.  Sea Air Freight

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sea Air Freight

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CMC Investment and Sea Air

The main advantage of trading using opposite CMC Investment and Sea Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Investment position performs unexpectedly, Sea Air 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 Sea Air will offset losses from the drop in Sea Air's long position.

The idea behind CMC Investment JSC and Sea Air Freight 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.