Correlation Between Cairo Communication and CSL

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

By analyzing existing cross correlation between Cairo Communication SpA and CSL Limited, you can compare the effects of market volatilities on Cairo Communication and CSL 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 Cairo Communication with a short position of CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairo Communication and CSL.

Diversification Opportunities for Cairo Communication and CSL

-0.87

Correlation Coefficient

Cairo Communication  CSL

Pay attention - limited upside

The 3 months correlation between Cairo and CSL is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cairo Communication SpA and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited and Cairo Communication 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 Cairo Communication SpA are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of Cairo Communication i.e., Cairo Communication and CSL go up and down completely randomly.

Pair Corralation between Cairo Communication and CSL

Assuming the 90 days trading horizon Cairo Communication SpA is expected to generate 1.41 times more return on investment than CSL. However, Cairo Communication is 1.41 times more volatile than CSL Limited. It trades about 0.17 of its potential returns per unit of risk. CSL Limited is currently generating about -0.18 per unit of risk. If you would invest  241.00  in Cairo Communication SpA on December 20, 2024 and sell it today you would earn a total of  46.00  from holding Cairo Communication SpA or generate 19.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cairo Communication SpA  vs.  CSL Limited

Cairo Communication SpA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Communication SpA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Cairo Communication unveiled solid returns over the last few months and may actually be approaching a breakup point.

CSL Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cairo Communication and CSL

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

The idea behind Cairo Communication SpA and CSL Limited 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.