Correlation Between CMC Investment and Mobile World

Can any of the company-specific risk be diversified away by investing in both CMC Investment and Mobile World 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 Mobile World 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 Mobile World Investment, you can compare the effects of market volatilities on CMC Investment and Mobile World 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 Mobile World. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Investment and Mobile World.

Diversification Opportunities for CMC Investment and Mobile World

0.7

Correlation Coefficient

CMC Investment  Mobile World

Poor diversification

The 3 months correlation between CMC and Mobile is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CMC Investment JSC and Mobile World Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mobile World Investment 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 Mobile World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mobile World Investment has no effect on the direction of CMC Investment i.e., CMC Investment and Mobile World go up and down completely randomly.

Pair Corralation between CMC Investment and Mobile World

Assuming the 90 days trading horizon CMC Investment JSC is expected to generate 2.99 times more return on investment than Mobile World. However, CMC Investment is 2.99 times more volatile than Mobile World Investment. It trades about 0.1 of its potential returns per unit of risk. Mobile World Investment is currently generating about 0.08 per unit of risk. If you would invest  550,000  in CMC Investment JSC on September 29, 2024 and sell it today you would earn a total of  30,000  from holding CMC Investment JSC or generate 5.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	68.18%
Values	Daily Returns

CMC Investment JSC  vs.  Mobile World Investment

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Mobile World Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CMC Investment and Mobile World

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

The idea behind CMC Investment JSC and Mobile World Investment 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.