Correlation Between CMC Magnetics and Compeq Manufacturing

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

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

Diversification Opportunities for CMC Magnetics and Compeq Manufacturing

0.36

Correlation Coefficient

CMC Magnetics  Compeq Manufacturing

Weak diversification

The 3 months correlation between CMC and Compeq is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CMC Magnetics Corp and Compeq Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compeq Manufacturing and CMC Magnetics 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 CMC Magnetics Corp are associated (or correlated) with Compeq Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compeq Manufacturing has no effect on the direction of CMC Magnetics i.e., CMC Magnetics and Compeq Manufacturing go up and down completely randomly.

Pair Corralation between CMC Magnetics and Compeq Manufacturing

Assuming the 90 days trading horizon CMC Magnetics Corp is expected to under-perform the Compeq Manufacturing. But the stock apears to be less risky and, when comparing its historical volatility, CMC Magnetics Corp is 1.68 times less risky than Compeq Manufacturing. The stock trades about -0.12 of its potential returns per unit of risk. The Compeq Manufacturing Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  7,030  in Compeq Manufacturing Co on September 17, 2024 and sell it today you would lose (350.00) from holding Compeq Manufacturing Co or give up 4.98% of portfolio value over 90 days.

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

CMC Magnetics Corp  vs.  Compeq Manufacturing Co

CMC Magnetics Corp

Risk-Adjusted Performance

0 of 100

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.

Compeq Manufacturing

Risk-Adjusted Performance

0 of 100

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 fairly stable basic indicators, Compeq Manufacturing is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with CMC Magnetics and Compeq Manufacturing

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

The idea behind CMC Magnetics Corp and Compeq Manufacturing Co 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.