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 Real, 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

0.7

Correlation Coefficient

CSIF III  CSIF I

Poor diversification

The 3 months correlation between CSIF and CSIF is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CSIF III Eq and CSIF I Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSIF I Real 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 Real 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 is expected to generate 4.05 times less return on investment than CSIF I. In addition to that, CSIF III is 1.17 times more volatile than CSIF I Real. It trades about 0.05 of its total potential returns per unit of risk. CSIF I Real is currently generating about 0.22 per unit of volatility. If you would invest  187,379  in CSIF I Real on September 27, 2024 and sell it today you would earn a total of  13,929  from holding CSIF I Real or generate 7.43% return on investment over 90 days.

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

CSIF III Eq  vs.  CSIF I Real

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.

CSIF I Real

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CSIF I Real are ranked lower than 17 (%) 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.

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 Real 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 Transaction History module to view history of all your transactions and understand their impact on performance.