Correlation Between CN MODERN and Gear Energy

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

By analyzing existing cross correlation between CN MODERN DAIRY and Gear Energy, you can compare the effects of market volatilities on CN MODERN and Gear Energy 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 CN MODERN with a short position of Gear Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and Gear Energy.

Diversification Opportunities for CN MODERN and Gear Energy

-0.39

Correlation Coefficient

CN MODERN  Gear Energy

Very good diversification

The 3 months correlation between 07M and Gear is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and Gear Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear Energy and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with Gear Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear Energy has no effect on the direction of CN MODERN i.e., CN MODERN and Gear Energy go up and down completely randomly.

Pair Corralation between CN MODERN and Gear Energy

Assuming the 90 days trading horizon CN MODERN DAIRY is expected to generate 1.38 times more return on investment than Gear Energy. However, CN MODERN is 1.38 times more volatile than Gear Energy. It trades about 0.12 of its potential returns per unit of risk. Gear Energy is currently generating about -0.2 per unit of risk. If you would invest  10.00  in CN MODERN DAIRY on October 4, 2024 and sell it today you would earn a total of  1.00  from holding CN MODERN DAIRY or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CN MODERN DAIRY  vs.  Gear Energy

CN MODERN DAIRY

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, CN MODERN is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Gear Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CN MODERN and Gear Energy

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

The idea behind CN MODERN DAIRY and Gear Energy 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.