Correlation Between CIM FINANCIAL and QUALITY BEVERAGES

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

By analyzing existing cross correlation between CIM FINANCIAL SERVICES and QUALITY BEVERAGES LTD, you can compare the effects of market volatilities on CIM FINANCIAL and QUALITY BEVERAGES 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 CIM FINANCIAL with a short position of QUALITY BEVERAGES. Check out your portfolio center. Please also check ongoing floating volatility patterns of CIM FINANCIAL and QUALITY BEVERAGES.

Diversification Opportunities for CIM FINANCIAL and QUALITY BEVERAGES

0.56

Correlation Coefficient

CIM FINANCIAL  QUALITY BEVERAGES

Very weak diversification

The 3 months correlation between CIM and QUALITY is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding CIM FINANCIAL SERVICES and QUALITY BEVERAGES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QUALITY BEVERAGES LTD and CIM FINANCIAL 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 CIM FINANCIAL SERVICES are associated (or correlated) with QUALITY BEVERAGES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QUALITY BEVERAGES LTD has no effect on the direction of CIM FINANCIAL i.e., CIM FINANCIAL and QUALITY BEVERAGES go up and down completely randomly.

Pair Corralation between CIM FINANCIAL and QUALITY BEVERAGES

Assuming the 90 days trading horizon CIM FINANCIAL is expected to generate 2.03 times less return on investment than QUALITY BEVERAGES. But when comparing it to its historical volatility, CIM FINANCIAL SERVICES is 2.93 times less risky than QUALITY BEVERAGES. It trades about 0.15 of its potential returns per unit of risk. QUALITY BEVERAGES LTD is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,075  in QUALITY BEVERAGES LTD on December 27, 2024 and sell it today you would earn a total of  275.00  from holding QUALITY BEVERAGES LTD or generate 25.58% return on investment over 90 days.

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

CIM FINANCIAL SERVICES  vs.  QUALITY BEVERAGES LTD

CIM FINANCIAL SERVICES

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CIM FINANCIAL SERVICES are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, CIM FINANCIAL displayed solid returns over the last few months and may actually be approaching a breakup point.

QUALITY BEVERAGES LTD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QUALITY BEVERAGES LTD are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, QUALITY BEVERAGES displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CIM FINANCIAL and QUALITY BEVERAGES

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

The idea behind CIM FINANCIAL SERVICES and QUALITY BEVERAGES LTD 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.