Correlation Between CSIF III and CSIF I

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

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

Diversification Opportunities for CSIF III and CSIF I

-0.47

Correlation Coefficient

CSIF III  CSIF I

Very good diversification

The 3 months correlation between CSIF and CSIF is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding CSIF III Eq and CSIF I Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSIF I Equity 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 Eq are associated (or correlated) with CSIF I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSIF I Equity has no effect on the direction of CSIF III i.e., CSIF III and CSIF I go up and down completely randomly.

Pair Corralation between CSIF III and CSIF I

Assuming the 90 days trading horizon CSIF III Eq is expected to generate 1.02 times more return on investment than CSIF I. However, CSIF III is 1.02 times more volatile than CSIF I Equity. It trades about 0.14 of its potential returns per unit of risk. CSIF I Equity is currently generating about -0.11 per unit of risk. If you would invest  165,144  in CSIF III Eq on September 27, 2024 and sell it today you would earn a total of  11,259  from holding CSIF III Eq or generate 6.82% return on investment over 90 days.

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

CSIF III Eq  vs.  CSIF I Equity

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.

CSIF I Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSIF I Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong forward indicators, CSIF I is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CSIF III and CSIF I

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

The idea behind CSIF III Eq and CSIF I Equity 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.

Check out your portfolio center.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.