Correlation Between CI First and CI MidCap

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

By analyzing existing cross correlation between CI First Asset and CI MidCap Dividend, you can compare the effects of market volatilities on CI First and CI MidCap 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 CI First with a short position of CI MidCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI First and CI MidCap.

Diversification Opportunities for CI First and CI MidCap

-0.32

Correlation Coefficient

CI First  CI MidCap

Very good diversification

The 3 months correlation between MXF and UMI is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CI First Asset and CI MidCap Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI MidCap Dividend and CI First 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 CI First Asset are associated (or correlated) with CI MidCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI MidCap Dividend has no effect on the direction of CI First i.e., CI First and CI MidCap go up and down completely randomly.

Pair Corralation between CI First and CI MidCap

Assuming the 90 days trading horizon CI First is expected to generate 12.74 times less return on investment than CI MidCap. In addition to that, CI First is 1.92 times more volatile than CI MidCap Dividend. It trades about 0.01 of its total potential returns per unit of risk. CI MidCap Dividend is currently generating about 0.14 per unit of volatility. If you would invest  3,290  in CI MidCap Dividend on September 16, 2024 and sell it today you would earn a total of  258.00  from holding CI MidCap Dividend or generate 7.84% return on investment over 90 days.

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

CI First Asset  vs.  CI MidCap Dividend

CI First Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CI First Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, CI First is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CI MidCap Dividend

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CI MidCap Dividend are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, CI MidCap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CI First and CI MidCap

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

The idea behind CI First Asset and CI MidCap Dividend 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.