Correlation Between CSIF III and CSIF III

Can any of the company-specific risk be diversified away by investing in both CSIF III 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 III 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 III Equity and CSIF III Eq, you can compare the effects of market volatilities on CSIF III 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 III with a short position of CSIF III. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSIF III and CSIF III.

Diversification Opportunities for CSIF III and CSIF III

0.83

Correlation Coefficient

CSIF III  CSIF III

Very poor diversification

The 3 months correlation between CSIF and CSIF is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding CSIF III Equity 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 III 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 III Equity 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 III i.e., CSIF III and CSIF III go up and down completely randomly.

Pair Corralation between CSIF III and CSIF III

Assuming the 90 days trading horizon CSIF III Equity is expected to under-perform the CSIF III. But the fund apears to be less risky and, when comparing its historical volatility, CSIF III Equity is 1.83 times less risky than CSIF III. The fund trades about -0.34 of its potential returns per unit of risk. The CSIF III Eq is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  177,990  in CSIF III Eq on September 27, 2024 and sell it today you would lose (1,587) from holding CSIF III Eq or give up 0.89% of portfolio value over 90 days.

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

CSIF III Equity  vs.  CSIF III Eq

CSIF III Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSIF III Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, CSIF III is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CSIF III Eq

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CSIF III Eq are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather unsteady technical and fundamental indicators, CSIF III may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CSIF III and CSIF III

The main advantage of trading using opposite CSIF III and CSIF III positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSIF III 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 III Equity 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.