Correlation Between C1MI34 and Otis Worldwide

Can any of the company-specific risk be diversified away by investing in both C1MI34 and Otis Worldwide 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 C1MI34 and Otis Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between C1MI34 and Otis Worldwide, you can compare the effects of market volatilities on C1MI34 and Otis Worldwide 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 C1MI34 with a short position of Otis Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of C1MI34 and Otis Worldwide.

Diversification Opportunities for C1MI34 and Otis Worldwide

0.69

Correlation Coefficient

C1MI34  Otis Worldwide

Poor diversification

The 3 months correlation between C1MI34 and Otis is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding C1MI34 and Otis Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otis Worldwide and C1MI34 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 C1MI34 are associated (or correlated) with Otis Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otis Worldwide has no effect on the direction of C1MI34 i.e., C1MI34 and Otis Worldwide go up and down completely randomly.

Pair Corralation between C1MI34 and Otis Worldwide

Assuming the 90 days trading horizon C1MI34 is expected to generate 1.94 times more return on investment than Otis Worldwide. However, C1MI34 is 1.94 times more volatile than Otis Worldwide. It trades about 0.13 of its potential returns per unit of risk. Otis Worldwide is currently generating about 0.06 per unit of risk. If you would invest  36,784  in C1MI34 on September 25, 2024 and sell it today you would earn a total of  18,566  from holding C1MI34 or generate 50.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

C1MI34  vs.  Otis Worldwide

C1MI34

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in C1MI34 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, C1MI34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Otis Worldwide

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Otis Worldwide are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Otis Worldwide is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with C1MI34 and Otis Worldwide

The main advantage of trading using opposite C1MI34 and Otis Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if C1MI34 position performs unexpectedly, Otis Worldwide 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 Otis Worldwide will offset losses from the drop in Otis Worldwide's long position.

The idea behind C1MI34 and Otis Worldwide 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.