Correlation Between CPN Commercial and CP Tower

Can any of the company-specific risk be diversified away by investing in both CPN Commercial and CP Tower 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 CPN Commercial and CP Tower into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CPN Commercial Growth and CP Tower Growth, you can compare the effects of market volatilities on CPN Commercial and CP Tower 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 CPN Commercial with a short position of CP Tower. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPN Commercial and CP Tower.

Diversification Opportunities for CPN Commercial and CP Tower

0.42

Correlation Coefficient

CPN Commercial  CP Tower

Very weak diversification

The 3 months correlation between CPN and CPTGF is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding CPN Commercial Growth and CP Tower Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CP Tower Growth and CPN Commercial 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 CPN Commercial Growth are associated (or correlated) with CP Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CP Tower Growth has no effect on the direction of CPN Commercial i.e., CPN Commercial and CP Tower go up and down completely randomly.

Pair Corralation between CPN Commercial and CP Tower

Assuming the 90 days trading horizon CPN Commercial Growth is expected to generate 0.7 times more return on investment than CP Tower. However, CPN Commercial Growth is 1.42 times less risky than CP Tower. It trades about 0.07 of its potential returns per unit of risk. CP Tower Growth is currently generating about 0.03 per unit of risk. If you would invest  585.00  in CPN Commercial Growth on September 5, 2024 and sell it today you would earn a total of  30.00  from holding CPN Commercial Growth or generate 5.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	73.02%
Values	Daily Returns

CPN Commercial Growth  vs.  CP Tower Growth

CPN Commercial Growth

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPN Commercial Growth are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, CPN Commercial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CP Tower Growth

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days CP Tower Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, CP Tower is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CPN Commercial and CP Tower

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

The idea behind CPN Commercial Growth and CP Tower Growth 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.