Correlation Between CSIF I and CSIF III

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

By analyzing existing cross correlation between CSIF I Real and CSIF III Eq, you can compare the effects of market volatilities on CSIF I and CSIF III 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 CSIF I with a short position of CSIF III. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSIF I and CSIF III.

Diversification Opportunities for CSIF I and CSIF III

0.69

Correlation Coefficient

CSIF I  CSIF III

Poor diversification

The 3 months correlation between CSIF and CSIF is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding CSIF I Real and CSIF III Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSIF III Eq and CSIF I 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 CSIF I Real are associated (or correlated) with CSIF III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSIF III Eq has no effect on the direction of CSIF I i.e., CSIF I and CSIF III go up and down completely randomly.

Pair Corralation between CSIF I and CSIF III

Assuming the 90 days trading horizon CSIF I is expected to generate 1.66 times less return on investment than CSIF III. But when comparing it to its historical volatility, CSIF I Real is 1.07 times less risky than CSIF III. It trades about 0.07 of its potential returns per unit of risk. CSIF III Eq is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  120,226  in CSIF III Eq on September 26, 2024 and sell it today you would earn a total of  49,205  from holding CSIF III Eq or generate 40.93% return on investment over 90 days.

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

CSIF I Real  vs.  CSIF III Eq

CSIF I Real

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CSIF I Real are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly unsteady technical and fundamental indicators, CSIF I may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CSIF III Eq

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSIF III Eq are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, CSIF III is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CSIF I and CSIF III

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

The idea behind CSIF I Real and CSIF III Eq 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.