Correlation Between Bentre Aquaproduct and CMC Investment

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

By analyzing existing cross correlation between Bentre Aquaproduct Import and CMC Investment JSC, you can compare the effects of market volatilities on Bentre Aquaproduct and CMC Investment 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 Bentre Aquaproduct with a short position of CMC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bentre Aquaproduct and CMC Investment.

Diversification Opportunities for Bentre Aquaproduct and CMC Investment

0.62

Correlation Coefficient

Bentre Aquaproduct  CMC Investment

Poor diversification

The 3 months correlation between Bentre and CMC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bentre Aquaproduct Import and CMC Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Investment JSC and Bentre Aquaproduct 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 Bentre Aquaproduct Import are associated (or correlated) with CMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Investment JSC has no effect on the direction of Bentre Aquaproduct i.e., Bentre Aquaproduct and CMC Investment go up and down completely randomly.

Pair Corralation between Bentre Aquaproduct and CMC Investment

Assuming the 90 days trading horizon Bentre Aquaproduct is expected to generate 1.06 times less return on investment than CMC Investment. But when comparing it to its historical volatility, Bentre Aquaproduct Import is 2.43 times less risky than CMC Investment. It trades about 0.05 of its potential returns per unit of risk. CMC Investment JSC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  570,000  in CMC Investment JSC on October 3, 2024 and sell it today you would lose (30,000) from holding CMC Investment JSC or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.59%
Values	Daily Returns

Bentre Aquaproduct Import  vs.  CMC Investment JSC

Bentre Aquaproduct Import

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bentre Aquaproduct Import has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Bentre Aquaproduct is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CMC Investment JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CMC Investment JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bentre Aquaproduct and CMC Investment

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

The idea behind Bentre Aquaproduct Import and CMC Investment JSC 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.