Correlation Between CSIF III and La Foncire

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

Diversification Opportunities for CSIF III and La Foncire

0.75

Correlation Coefficient

CSIF III  La Foncire

Poor diversification

The 3 months correlation between CSIF and FOC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding CSIF III Eq and La Foncire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La Foncire 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 La Foncire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La Foncire has no effect on the direction of CSIF III i.e., CSIF III and La Foncire go up and down completely randomly.

Pair Corralation between CSIF III and La Foncire

Assuming the 90 days trading horizon CSIF III Eq is expected to under-perform the La Foncire. But the fund apears to be less risky and, when comparing its historical volatility, CSIF III Eq is 1.38 times less risky than La Foncire. The fund trades about -0.14 of its potential returns per unit of risk. The La Foncire is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  14,950  in La Foncire on September 26, 2024 and sell it today you would earn a total of  250.00  from holding La Foncire or generate 1.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

CSIF III Eq  vs.  La Foncire

CSIF III Eq

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CSIF III Eq are ranked lower than 2 (%) 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.

La Foncire

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in La Foncire are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly sluggish fundamental indicators, La Foncire may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CSIF III and La Foncire

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

The idea behind CSIF III Eq and La Foncire 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.