Correlation Between MUA and CIM FINANCIAL

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

By analyzing existing cross correlation between MUA LTD and CIM FINANCIAL SERVICES, you can compare the effects of market volatilities on MUA and CIM FINANCIAL 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 MUA with a short position of CIM FINANCIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of MUA and CIM FINANCIAL.

Diversification Opportunities for MUA and CIM FINANCIAL

0.27

Correlation Coefficient

MUA  CIM FINANCIAL

Modest diversification

The 3 months correlation between MUA and CIM is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding MUA LTD and CIM FINANCIAL SERVICES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIM FINANCIAL SERVICES and MUA 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 MUA LTD are associated (or correlated) with CIM FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIM FINANCIAL SERVICES has no effect on the direction of MUA i.e., MUA and CIM FINANCIAL go up and down completely randomly.

Pair Corralation between MUA and CIM FINANCIAL

Assuming the 90 days trading horizon MUA is expected to generate 2.29 times less return on investment than CIM FINANCIAL. In addition to that, MUA is 2.42 times more volatile than CIM FINANCIAL SERVICES. It trades about 0.03 of its total potential returns per unit of risk. CIM FINANCIAL SERVICES is currently generating about 0.15 per unit of volatility. If you would invest  1,115  in CIM FINANCIAL SERVICES on September 13, 2024 and sell it today you would earn a total of  140.00  from holding CIM FINANCIAL SERVICES or generate 12.56% return on investment over 90 days.

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

MUA LTD  vs.  CIM FINANCIAL SERVICES

MUA LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MUA LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, MUA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

CIM FINANCIAL SERVICES

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CIM FINANCIAL SERVICES are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, CIM FINANCIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MUA and CIM FINANCIAL

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

The idea behind MUA LTD and CIM FINANCIAL SERVICES 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.