Correlation Between CBO Territoria and FIPP SA

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

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

Diversification Opportunities for CBO Territoria and FIPP SA

-0.16

Correlation Coefficient

CBO Territoria  FIPP SA

Good diversification

The 3 months correlation between CBO and FIPP is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding CBO Territoria SA and FIPP SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIPP SA and CBO Territoria 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 CBO Territoria SA are associated (or correlated) with FIPP SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIPP SA has no effect on the direction of CBO Territoria i.e., CBO Territoria and FIPP SA go up and down completely randomly.

Pair Corralation between CBO Territoria and FIPP SA

Assuming the 90 days trading horizon CBO Territoria is expected to generate 2.96 times less return on investment than FIPP SA. But when comparing it to its historical volatility, CBO Territoria SA is 9.07 times less risky than FIPP SA. It trades about 0.05 of its potential returns per unit of risk. FIPP SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in FIPP SA on October 26, 2024 and sell it today you would lose (2.00) from holding FIPP SA or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.62%
Values	Daily Returns

CBO Territoria SA  vs.  FIPP SA

CBO Territoria SA

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CBO Territoria SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CBO Territoria is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

FIPP SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FIPP SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FIPP SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CBO Territoria and FIPP SA

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

The idea behind CBO Territoria SA and FIPP 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.