Correlation Between CBLT and Foraco International

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

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

Diversification Opportunities for CBLT and Foraco International

-0.17

Correlation Coefficient

CBLT  Foraco International

Good diversification

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

Pair Corralation between CBLT and Foraco International

Assuming the 90 days trading horizon CBLT Inc is expected to generate 3.51 times more return on investment than Foraco International. However, CBLT is 3.51 times more volatile than Foraco International SA. It trades about 0.05 of its potential returns per unit of risk. Foraco International SA is currently generating about -0.05 per unit of risk. If you would invest  1.50  in CBLT Inc on December 28, 2024 and sell it today you would earn a total of  0.00  from holding CBLT Inc or generate 0.0% return on investment over 90 days.

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

CBLT Inc  vs.  Foraco International SA

CBLT Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CBLT Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, CBLT showed solid returns over the last few months and may actually be approaching a breakup point.

Foraco International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foraco International SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with CBLT and Foraco International

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

The idea behind CBLT Inc and Foraco International 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.