Correlation Between CMC Investment and TDT Investment

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

Diversification Opportunities for CMC Investment and TDT Investment

0.28

Correlation Coefficient

CMC Investment  TDT Investment

Modest diversification

The 3 months correlation between CMC and TDT is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CMC Investment JSC and TDT Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TDT 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 TDT Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TDT Investment has no effect on the direction of CMC Investment i.e., CMC Investment and TDT Investment go up and down completely randomly.

Pair Corralation between CMC Investment and TDT Investment

Assuming the 90 days trading horizon CMC Investment JSC is expected to generate 4.68 times more return on investment than TDT Investment. However, CMC Investment is 4.68 times more volatile than TDT Investment and. It trades about 0.1 of its potential returns per unit of risk. TDT Investment and is currently generating about 0.33 per unit of risk. If you would invest  550,000  in CMC Investment JSC on September 28, 2024 and sell it today you would earn a total of  30,000  from holding CMC Investment JSC or generate 5.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	63.64%
Values	Daily Returns

CMC Investment JSC  vs.  TDT 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.

TDT Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TDT Investment and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TDT Investment 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 TDT Investment

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

The idea behind CMC Investment JSC and TDT 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.