Correlation Between Vincom Retail and CMC Investment

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

By analyzing existing cross correlation between Vincom Retail JSC and CMC Investment JSC, you can compare the effects of market volatilities on Vincom Retail and CMC Investment 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 Vincom Retail with a short position of CMC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vincom Retail and CMC Investment.

Diversification Opportunities for Vincom Retail and CMC Investment

0.74

Correlation Coefficient

Vincom Retail  CMC Investment

Poor diversification

The 3 months correlation between Vincom and CMC is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vincom Retail JSC and CMC Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Investment JSC and Vincom Retail 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 Vincom Retail JSC are associated (or correlated) with CMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Investment JSC has no effect on the direction of Vincom Retail i.e., Vincom Retail and CMC Investment go up and down completely randomly.

Pair Corralation between Vincom Retail and CMC Investment

Assuming the 90 days trading horizon Vincom Retail JSC is expected to under-perform the CMC Investment. But the stock apears to be less risky and, when comparing its historical volatility, Vincom Retail JSC is 4.04 times less risky than CMC Investment. The stock trades about -0.14 of its potential returns per unit of risk. The CMC Investment JSC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  660,000  in CMC Investment JSC on September 28, 2024 and sell it today you would lose (40,000) from holding CMC Investment JSC or give up 6.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	59.38%
Values	Daily Returns

Vincom Retail JSC  vs.  CMC Investment JSC

Vincom Retail JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vincom Retail JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

CMC Investment JSC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vincom Retail and CMC Investment

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

The idea behind Vincom Retail JSC and CMC Investment JSC 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.