Correlation Between Lexibook Linguistic and CMG Cleantech

Can any of the company-specific risk be diversified away by investing in both Lexibook Linguistic and CMG Cleantech 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 Lexibook Linguistic and CMG Cleantech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lexibook Linguistic Electronic and CMG Cleantech SA, you can compare the effects of market volatilities on Lexibook Linguistic and CMG Cleantech 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 Lexibook Linguistic with a short position of CMG Cleantech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lexibook Linguistic and CMG Cleantech.

Diversification Opportunities for Lexibook Linguistic and CMG Cleantech

0.61

Correlation Coefficient

Lexibook Linguistic  CMG Cleantech

Poor diversification

The 3 months correlation between Lexibook and CMG is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lexibook Linguistic Electronic and CMG Cleantech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMG Cleantech SA and Lexibook Linguistic 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 Lexibook Linguistic Electronic are associated (or correlated) with CMG Cleantech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMG Cleantech SA has no effect on the direction of Lexibook Linguistic i.e., Lexibook Linguistic and CMG Cleantech go up and down completely randomly.

Pair Corralation between Lexibook Linguistic and CMG Cleantech

Assuming the 90 days trading horizon Lexibook Linguistic is expected to generate 11.64 times less return on investment than CMG Cleantech. But when comparing it to its historical volatility, Lexibook Linguistic Electronic is 8.56 times less risky than CMG Cleantech. It trades about 0.11 of its potential returns per unit of risk. CMG Cleantech SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  100.00  in CMG Cleantech SA on September 12, 2024 and sell it today you would earn a total of  28.00  from holding CMG Cleantech SA or generate 28.0% return on investment over 90 days.

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

Lexibook Linguistic Electronic  vs.  CMG Cleantech SA

Lexibook Linguistic

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lexibook Linguistic Electronic are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Lexibook Linguistic is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

CMG Cleantech SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CMG Cleantech SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CMG Cleantech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lexibook Linguistic and CMG Cleantech

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

The idea behind Lexibook Linguistic Electronic and CMG Cleantech SA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.