Correlation Between Cameo Communications and Simple Mart

Can any of the company-specific risk be diversified away by investing in both Cameo Communications and Simple Mart 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 Cameo Communications and Simple Mart into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cameo Communications and Simple Mart Retail, you can compare the effects of market volatilities on Cameo Communications and Simple Mart 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 Cameo Communications with a short position of Simple Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cameo Communications and Simple Mart.

Diversification Opportunities for Cameo Communications and Simple Mart

-0.35

Correlation Coefficient

Cameo Communications  Simple Mart

Very good diversification

The 3 months correlation between Cameo and Simple is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cameo Communications and Simple Mart Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simple Mart Retail and Cameo Communications 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 Cameo Communications are associated (or correlated) with Simple Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simple Mart Retail has no effect on the direction of Cameo Communications i.e., Cameo Communications and Simple Mart go up and down completely randomly.

Pair Corralation between Cameo Communications and Simple Mart

Assuming the 90 days trading horizon Cameo Communications is expected to generate 4.84 times more return on investment than Simple Mart. However, Cameo Communications is 4.84 times more volatile than Simple Mart Retail. It trades about 0.07 of its potential returns per unit of risk. Simple Mart Retail is currently generating about -0.08 per unit of risk. If you would invest  1,090  in Cameo Communications on September 28, 2024 and sell it today you would earn a total of  140.00  from holding Cameo Communications or generate 12.84% return on investment over 90 days.

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

Cameo Communications  vs.  Simple Mart Retail

Cameo Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cameo Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cameo Communications showed solid returns over the last few months and may actually be approaching a breakup point.

Simple Mart Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simple Mart Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Simple Mart 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 Cameo Communications and Simple Mart

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

The idea behind Cameo Communications and Simple Mart Retail 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.