Correlation Between Major Cineplex and CPN Retail

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

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

Diversification Opportunities for Major Cineplex and CPN Retail

0.24

Correlation Coefficient

Major Cineplex  CPN Retail

Modest diversification

The 3 months correlation between Major and CPN is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Major Cineplex Lifestyle and CPN Retail Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPN Retail Growth and Major Cineplex 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 Major Cineplex Lifestyle are associated (or correlated) with CPN Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPN Retail Growth has no effect on the direction of Major Cineplex i.e., Major Cineplex and CPN Retail go up and down completely randomly.

Pair Corralation between Major Cineplex and CPN Retail

Assuming the 90 days trading horizon Major Cineplex Lifestyle is expected to generate 1.05 times more return on investment than CPN Retail. However, Major Cineplex is 1.05 times more volatile than CPN Retail Growth. It trades about 0.11 of its potential returns per unit of risk. CPN Retail Growth is currently generating about 0.08 per unit of risk. If you would invest  380.00  in Major Cineplex Lifestyle on September 4, 2024 and sell it today you would earn a total of  50.00  from holding Major Cineplex Lifestyle or generate 13.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Major Cineplex Lifestyle  vs.  CPN Retail Growth

Major Cineplex Lifestyle

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Major Cineplex Lifestyle are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Major Cineplex disclosed solid returns over the last few months and may actually be approaching a breakup point.

CPN Retail Growth

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPN Retail Growth are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, CPN Retail may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Major Cineplex and CPN Retail

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

The idea behind Major Cineplex Lifestyle and CPN Retail 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.