Correlation Between Crescent Star and WorldCall Telecom

Can any of the company-specific risk be diversified away by investing in both Crescent Star and WorldCall Telecom 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 Crescent Star and WorldCall Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Crescent Star Insurance and WorldCall Telecom, you can compare the effects of market volatilities on Crescent Star and WorldCall Telecom 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 Crescent Star with a short position of WorldCall Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crescent Star and WorldCall Telecom.

Diversification Opportunities for Crescent Star and WorldCall Telecom

0.7

Correlation Coefficient

Crescent Star  WorldCall Telecom

Poor diversification

The 3 months correlation between Crescent and WorldCall is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Star Insurance and WorldCall Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WorldCall Telecom and Crescent Star 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 Crescent Star Insurance are associated (or correlated) with WorldCall Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WorldCall Telecom has no effect on the direction of Crescent Star i.e., Crescent Star and WorldCall Telecom go up and down completely randomly.

Pair Corralation between Crescent Star and WorldCall Telecom

Assuming the 90 days trading horizon Crescent Star Insurance is expected to under-perform the WorldCall Telecom. But the stock apears to be less risky and, when comparing its historical volatility, Crescent Star Insurance is 1.03 times less risky than WorldCall Telecom. The stock trades about -0.02 of its potential returns per unit of risk. The WorldCall Telecom is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  138.00  in WorldCall Telecom on September 13, 2024 and sell it today you would earn a total of  27.00  from holding WorldCall Telecom or generate 19.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Crescent Star Insurance  vs.  WorldCall Telecom

Crescent Star Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crescent Star Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Crescent Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WorldCall Telecom

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WorldCall Telecom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, WorldCall Telecom reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crescent Star and WorldCall Telecom

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

The idea behind Crescent Star Insurance and WorldCall Telecom 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.