Correlation Between 1369 Construction and CMC Investment

Can any of the company-specific risk be diversified away by investing in both 1369 Construction 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 1369 Construction and CMC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1369 Construction JSC and CMC Investment JSC, you can compare the effects of market volatilities on 1369 Construction 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 1369 Construction with a short position of CMC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1369 Construction and CMC Investment.

Diversification Opportunities for 1369 Construction and CMC Investment

0.83

Correlation Coefficient

1369 Construction  CMC Investment

Very poor diversification

The 3 months correlation between 1369 and CMC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding 1369 Construction JSC 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 1369 Construction 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 1369 Construction JSC 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 1369 Construction i.e., 1369 Construction and CMC Investment go up and down completely randomly.

Pair Corralation between 1369 Construction and CMC Investment

Assuming the 90 days trading horizon 1369 Construction JSC is expected to under-perform the CMC Investment. But the stock apears to be less risky and, when comparing its historical volatility, 1369 Construction JSC is 1.83 times less risky than CMC Investment. The stock trades about 0.0 of its potential returns per unit of risk. The 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	Strong
Accuracy	71.25%
Values	Daily Returns

1369 Construction JSC  vs.  CMC Investment JSC

1369 Construction JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1369 Construction 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 basic 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.

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 1369 Construction and CMC Investment

The main advantage of trading using opposite 1369 Construction and CMC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1369 Construction 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 1369 Construction JSC 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .