Correlation Between CFI Holding and New Tech

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

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

Diversification Opportunities for CFI Holding and New Tech

-0.39

Correlation Coefficient

CFI Holding  New Tech

Very good diversification

The 3 months correlation between CFI and New is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding CFI Holding SA and New Tech Venture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Tech Venture and CFI Holding 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 CFI Holding SA are associated (or correlated) with New Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Tech Venture has no effect on the direction of CFI Holding i.e., CFI Holding and New Tech go up and down completely randomly.

Pair Corralation between CFI Holding and New Tech

Assuming the 90 days trading horizon CFI Holding is expected to generate 200.63 times less return on investment than New Tech. But when comparing it to its historical volatility, CFI Holding SA is 1.89 times less risky than New Tech. It trades about 0.0 of its potential returns per unit of risk. New Tech Venture is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  13.00  in New Tech Venture on November 28, 2024 and sell it today you would earn a total of  6.00  from holding New Tech Venture or generate 46.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.66%
Values	Daily Returns

CFI Holding SA  vs.  New Tech Venture

CFI Holding SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CFI Holding SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, CFI Holding is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

New Tech Venture

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Tech Venture are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, New Tech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CFI Holding and New Tech

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

The idea behind CFI Holding SA and New Tech Venture 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.