Correlation Between Compeq Manufacturing and CMC Magnetics

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

By analyzing existing cross correlation between Compeq Manufacturing Co and CMC Magnetics Corp, you can compare the effects of market volatilities on Compeq Manufacturing and CMC Magnetics 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 Compeq Manufacturing with a short position of CMC Magnetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compeq Manufacturing and CMC Magnetics.

Diversification Opportunities for Compeq Manufacturing and CMC Magnetics

0.58

Correlation Coefficient

Compeq Manufacturing  CMC Magnetics

Very weak diversification

The 3 months correlation between Compeq and CMC is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Compeq Manufacturing Co and CMC Magnetics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Magnetics Corp and Compeq Manufacturing 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 Compeq Manufacturing Co are associated (or correlated) with CMC Magnetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Magnetics Corp has no effect on the direction of Compeq Manufacturing i.e., Compeq Manufacturing and CMC Magnetics go up and down completely randomly.

Pair Corralation between Compeq Manufacturing and CMC Magnetics

Assuming the 90 days trading horizon Compeq Manufacturing Co is expected to under-perform the CMC Magnetics. In addition to that, Compeq Manufacturing is 1.11 times more volatile than CMC Magnetics Corp. It trades about -0.13 of its total potential returns per unit of risk. CMC Magnetics Corp is currently generating about -0.1 per unit of volatility. If you would invest  1,040  in CMC Magnetics Corp on December 28, 2024 and sell it today you would lose (94.00) from holding CMC Magnetics Corp or give up 9.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.21%
Values	Daily Returns

Compeq Manufacturing Co  vs.  CMC Magnetics Corp

Compeq Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compeq Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

CMC Magnetics Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days CMC Magnetics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Compeq Manufacturing and CMC Magnetics

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

The idea behind Compeq Manufacturing Co and CMC Magnetics Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.