Correlation Between CU Medical and N Citron

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

By analyzing existing cross correlation between CU Medical Systems and N Citron, you can compare the effects of market volatilities on CU Medical and N Citron 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 CU Medical with a short position of N Citron. Check out your portfolio center. Please also check ongoing floating volatility patterns of CU Medical and N Citron.

Diversification Opportunities for CU Medical and N Citron

-0.07

Correlation Coefficient

CU Medical  N Citron

Good diversification

The 3 months correlation between 115480 and 101400 is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding CU Medical Systems and N Citron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N Citron and CU Medical 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 CU Medical Systems are associated (or correlated) with N Citron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N Citron has no effect on the direction of CU Medical i.e., CU Medical and N Citron go up and down completely randomly.

Pair Corralation between CU Medical and N Citron

Assuming the 90 days trading horizon CU Medical Systems is expected to under-perform the N Citron. But the stock apears to be less risky and, when comparing its historical volatility, CU Medical Systems is 2.6 times less risky than N Citron. The stock trades about -0.22 of its potential returns per unit of risk. The N Citron is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  37,700  in N Citron on December 4, 2024 and sell it today you would earn a total of  9,500  from holding N Citron or generate 25.2% return on investment over 90 days.

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

CU Medical Systems  vs.  N Citron

CU Medical Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days CU Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CU Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

N Citron

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in N Citron are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, N Citron sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CU Medical and N Citron

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

The idea behind CU Medical Systems and N Citron 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.