Correlation Between Cboe UK and Cornish Metals

Can any of the company-specific risk be diversified away by investing in both Cboe UK and Cornish Metals 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 Cboe UK and Cornish Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cboe UK Consumer and Cornish Metals, you can compare the effects of market volatilities on Cboe UK and Cornish Metals 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 Cboe UK with a short position of Cornish Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cboe UK and Cornish Metals.

Diversification Opportunities for Cboe UK and Cornish Metals

-0.57

Correlation Coefficient

Cboe UK  Cornish Metals

Excellent diversification

The 3 months correlation between Cboe and Cornish is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cboe UK Consumer and Cornish Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornish Metals and Cboe UK 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 Cboe UK Consumer are associated (or correlated) with Cornish Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornish Metals has no effect on the direction of Cboe UK i.e., Cboe UK and Cornish Metals go up and down completely randomly.

Pair Corralation between Cboe UK and Cornish Metals

Assuming the 90 days trading horizon Cboe UK Consumer is expected to generate 0.39 times more return on investment than Cornish Metals. However, Cboe UK Consumer is 2.53 times less risky than Cornish Metals. It trades about 0.0 of its potential returns per unit of risk. Cornish Metals is currently generating about -0.06 per unit of risk. If you would invest  3,265,909  in Cboe UK Consumer on December 1, 2024 and sell it today you would lose (2,147) from holding Cboe UK Consumer or give up 0.07% of portfolio value over 90 days.

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

Cboe UK Consumer  vs.  Cornish Metals

Pair Trading with Cboe UK and Cornish Metals

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

The idea behind Cboe UK Consumer and Cornish Metals 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 CEOs Directory module to screen CEOs from public companies around the world.