Correlation Between CI Group and Salee Colour

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

By analyzing existing cross correlation between CI Group Public and Salee Colour Public, you can compare the effects of market volatilities on CI Group and Salee Colour 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 CI Group with a short position of Salee Colour. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI Group and Salee Colour.

Diversification Opportunities for CI Group and Salee Colour

-0.37

Correlation Coefficient

CI Group  Salee Colour

Very good diversification

The 3 months correlation between CIG and Salee is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding CI Group Public and Salee Colour Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salee Colour Public and CI Group 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 CI Group Public are associated (or correlated) with Salee Colour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salee Colour Public has no effect on the direction of CI Group i.e., CI Group and Salee Colour go up and down completely randomly.

Pair Corralation between CI Group and Salee Colour

Assuming the 90 days trading horizon CI Group Public is expected to generate 6.25 times more return on investment than Salee Colour. However, CI Group is 6.25 times more volatile than Salee Colour Public. It trades about 0.14 of its potential returns per unit of risk. Salee Colour Public is currently generating about -0.18 per unit of risk. If you would invest  4.00  in CI Group Public on December 1, 2024 and sell it today you would earn a total of  1.00  from holding CI Group Public or generate 25.0% return on investment over 90 days.

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

CI Group Public  vs.  Salee Colour Public

CI Group Public

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CI Group Public are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, CI Group disclosed solid returns over the last few months and may actually be approaching a breakup point.

Salee Colour Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salee Colour Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Salee Colour is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CI Group and Salee Colour

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

The idea behind CI Group Public and Salee Colour Public 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.