Correlation Between CM AM and R Co

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

By analyzing existing cross correlation between CM AM Monplus NE and R co Valor F, you can compare the effects of market volatilities on CM AM and R Co 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 CM AM with a short position of R Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of CM AM and R Co.

Diversification Opportunities for CM AM and R Co

0.83

Correlation Coefficient

CM AM  R Co

Very poor diversification

The 3 months correlation between 0P0001F96C and 0P00017SX2 is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding CM AM Monplus NE and R co Valor F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on R co Valor and CM AM 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 CM AM Monplus NE are associated (or correlated) with R Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of R co Valor has no effect on the direction of CM AM i.e., CM AM and R Co go up and down completely randomly.

Pair Corralation between CM AM and R Co

Assuming the 90 days trading horizon CM AM is expected to generate 11.66 times less return on investment than R Co. But when comparing it to its historical volatility, CM AM Monplus NE is 77.88 times less risky than R Co. It trades about 1.46 of its potential returns per unit of risk. R co Valor F is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  280,171  in R co Valor F on September 5, 2024 and sell it today you would earn a total of  28,280  from holding R co Valor F or generate 10.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

CM AM Monplus NE  vs.  R co Valor F

CM AM Monplus

Risk-Adjusted Performance

96 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in CM AM Monplus NE are ranked lower than 96 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, CM AM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

R co Valor

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in R co Valor F are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, R Co may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CM AM and R Co

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

The idea behind CM AM Monplus NE and R co Valor F 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.