Correlation Between Communication System and CI Group

Can any of the company-specific risk be diversified away by investing in both Communication System and CI Group 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 Communication System and CI Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Communication System Solution and CI Group Public, you can compare the effects of market volatilities on Communication System and CI Group 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 Communication System with a short position of CI Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Communication System and CI Group.

Diversification Opportunities for Communication System and CI Group

0.09

Correlation Coefficient

Communication System  CI Group

Significant diversification

The 3 months correlation between Communication and CIG is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Communication System Solution and CI Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Group Public and Communication System 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 Communication System Solution are associated (or correlated) with CI Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Group Public has no effect on the direction of Communication System i.e., Communication System and CI Group go up and down completely randomly.

Pair Corralation between Communication System and CI Group

Assuming the 90 days trading horizon Communication System is expected to generate 16.82 times less return on investment than CI Group. But when comparing it to its historical volatility, Communication System Solution is 3.9 times less risky than CI Group. It trades about 0.02 of its potential returns per unit of risk. CI Group Public is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4.00  in CI Group Public on September 15, 2024 and sell it today you would earn a total of  1.00  from holding CI Group Public or generate 25.0% return on investment over 90 days.

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

Communication System Solution  vs.  CI Group Public

Communication System

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Communication System Solution are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Communication System is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CI Group Public

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CI Group Public are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, CI Group disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Communication System and CI Group

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

The idea behind Communication System Solution and CI Group Public 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.