Correlation Between CMG Cleantech and Compagnie

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

By analyzing existing cross correlation between CMG Cleantech SA and Compagnie de Chemins, you can compare the effects of market volatilities on CMG Cleantech and Compagnie 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 CMG Cleantech with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMG Cleantech and Compagnie.

Diversification Opportunities for CMG Cleantech and Compagnie

0.64

Correlation Coefficient

CMG Cleantech  Compagnie

Poor diversification

The 3 months correlation between CMG and Compagnie is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CMG Cleantech SA and Compagnie de Chemins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Chemins and CMG Cleantech 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 CMG Cleantech SA are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Chemins has no effect on the direction of CMG Cleantech i.e., CMG Cleantech and Compagnie go up and down completely randomly.

Pair Corralation between CMG Cleantech and Compagnie

Assuming the 90 days trading horizon CMG Cleantech SA is expected to generate 2.05 times more return on investment than Compagnie. However, CMG Cleantech is 2.05 times more volatile than Compagnie de Chemins. It trades about 0.2 of its potential returns per unit of risk. Compagnie de Chemins is currently generating about 0.19 per unit of risk. If you would invest  78.00  in CMG Cleantech SA on September 5, 2024 and sell it today you would earn a total of  47.00  from holding CMG Cleantech SA or generate 60.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

CMG Cleantech SA  vs.  Compagnie de Chemins

CMG Cleantech SA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CMG Cleantech SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CMG Cleantech reported solid returns over the last few months and may actually be approaching a breakup point.

Compagnie de Chemins

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Chemins are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Compagnie reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMG Cleantech and Compagnie

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

The idea behind CMG Cleantech SA and Compagnie de Chemins 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.