Correlation Between CKM Building and Holiday Entertainment

Can any of the company-specific risk be diversified away by investing in both CKM Building and Holiday Entertainment 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 CKM Building and Holiday Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CKM Building Material and Holiday Entertainment Co, you can compare the effects of market volatilities on CKM Building and Holiday Entertainment 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 CKM Building with a short position of Holiday Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CKM Building and Holiday Entertainment.

Diversification Opportunities for CKM Building and Holiday Entertainment

0.44

Correlation Coefficient

CKM Building  Holiday Entertainment

Very weak diversification

The 3 months correlation between CKM and Holiday is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CKM Building Material and Holiday Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holiday Entertainment and CKM Building 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 CKM Building Material are associated (or correlated) with Holiday Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holiday Entertainment has no effect on the direction of CKM Building i.e., CKM Building and Holiday Entertainment go up and down completely randomly.

Pair Corralation between CKM Building and Holiday Entertainment

Assuming the 90 days trading horizon CKM Building Material is expected to generate 2.31 times more return on investment than Holiday Entertainment. However, CKM Building is 2.31 times more volatile than Holiday Entertainment Co. It trades about 0.27 of its potential returns per unit of risk. Holiday Entertainment Co is currently generating about 0.07 per unit of risk. If you would invest  3,475  in CKM Building Material on December 22, 2024 and sell it today you would earn a total of  740.00  from holding CKM Building Material or generate 21.29% return on investment over 90 days.

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

CKM Building Material  vs.  Holiday Entertainment Co

CKM Building Material

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CKM Building Material are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CKM Building showed solid returns over the last few months and may actually be approaching a breakup point.

Holiday Entertainment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Holiday Entertainment Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Holiday Entertainment 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 CKM Building and Holiday Entertainment

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

The idea behind CKM Building Material and Holiday Entertainment 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.