Correlation Between CBO Territoria and Wendel

Can any of the company-specific risk be diversified away by investing in both CBO Territoria and Wendel 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 Wendel 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 Wendel, you can compare the effects of market volatilities on CBO Territoria and Wendel 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 Wendel. Check out your portfolio center. Please also check ongoing floating volatility patterns of CBO Territoria and Wendel.

Diversification Opportunities for CBO Territoria and Wendel

0.31

Correlation Coefficient

CBO Territoria  Wendel

Weak diversification

The 3 months correlation between CBO and Wendel is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding CBO Territoria SA and Wendel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wendel 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 Wendel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wendel has no effect on the direction of CBO Territoria i.e., CBO Territoria and Wendel go up and down completely randomly.

Pair Corralation between CBO Territoria and Wendel

Assuming the 90 days trading horizon CBO Territoria SA is expected to generate 0.42 times more return on investment than Wendel. However, CBO Territoria SA is 2.38 times less risky than Wendel. It trades about 0.07 of its potential returns per unit of risk. Wendel is currently generating about -0.02 per unit of risk. If you would invest  356.00  in CBO Territoria SA on December 29, 2024 and sell it today you would earn a total of  8.00  from holding CBO Territoria SA or generate 2.25% return on investment over 90 days.

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

CBO Territoria SA  vs.  Wendel

CBO Territoria SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CBO Territoria SA are ranked lower than 5 (%) 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.

Wendel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wendel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Wendel 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 Wendel

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

The idea behind CBO Territoria SA and Wendel 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.