Correlation Between AIM Industrial and CPN Retail

Can any of the company-specific risk be diversified away by investing in both AIM Industrial and CPN Retail 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 AIM Industrial and CPN Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for AIM Industrial and CPN Retail

0.17

Correlation Coefficient

AIM Industrial  CPN Retail

Average diversification

The 3 months correlation between AIM and CPN is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding AIM Industrial Growth and CPN Retail Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPN Retail Growth and AIM Industrial 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 AIM Industrial Growth are associated (or correlated) with CPN Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPN Retail Growth has no effect on the direction of AIM Industrial i.e., AIM Industrial and CPN Retail go up and down completely randomly.

Pair Corralation between AIM Industrial and CPN Retail

Assuming the 90 days trading horizon AIM Industrial is expected to generate 5.56 times less return on investment than CPN Retail. But when comparing it to its historical volatility, AIM Industrial Growth is 1.74 times less risky than CPN Retail. It trades about 0.01 of its potential returns per unit of risk. CPN Retail Growth is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,061  in CPN Retail Growth on December 2, 2024 and sell it today you would earn a total of  109.00  from holding CPN Retail Growth or generate 10.27% return on investment over 90 days.

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

AIM Industrial Growth  vs.  CPN Retail Growth

AIM Industrial Growth

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AIM Industrial Growth are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, AIM Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CPN Retail Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days CPN Retail Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CPN Retail is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AIM Industrial and CPN Retail

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

The idea behind AIM Industrial Growth and CPN Retail Growth 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.