Correlation Between CMC Investment and FIT INVEST

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

By analyzing existing cross correlation between CMC Investment JSC and FIT INVEST JSC, you can compare the effects of market volatilities on CMC Investment and FIT INVEST 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 CMC Investment with a short position of FIT INVEST. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Investment and FIT INVEST.

Diversification Opportunities for CMC Investment and FIT INVEST

0.29

Correlation Coefficient

CMC Investment  FIT INVEST

Modest diversification

The 3 months correlation between CMC and FIT is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CMC Investment JSC and FIT INVEST JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIT INVEST JSC and CMC Investment 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 CMC Investment JSC are associated (or correlated) with FIT INVEST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIT INVEST JSC has no effect on the direction of CMC Investment i.e., CMC Investment and FIT INVEST go up and down completely randomly.

Pair Corralation between CMC Investment and FIT INVEST

Assuming the 90 days trading horizon CMC Investment JSC is expected to under-perform the FIT INVEST. In addition to that, CMC Investment is 5.23 times more volatile than FIT INVEST JSC. It trades about -0.08 of its total potential returns per unit of risk. FIT INVEST JSC is currently generating about -0.06 per unit of volatility. If you would invest  422,000  in FIT INVEST JSC on October 6, 2024 and sell it today you would lose (4,000) from holding FIT INVEST JSC or give up 0.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

CMC Investment JSC  vs.  FIT INVEST JSC

CMC Investment JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CMC Investment JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

FIT INVEST JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FIT INVEST JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, FIT INVEST is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CMC Investment and FIT INVEST

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

The idea behind CMC Investment JSC and FIT INVEST JSC 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.