Correlation Between CMC Corp and Telecoms Informatics

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

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

Diversification Opportunities for CMC Corp and Telecoms Informatics

0.74

Correlation Coefficient

CMC Corp  Telecoms Informatics

Poor diversification

The 3 months correlation between CMC and Telecoms is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding CMC Corp and Telecoms Informatics JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecoms Informatics JSC and CMC Corp 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 Corp are associated (or correlated) with Telecoms Informatics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecoms Informatics JSC has no effect on the direction of CMC Corp i.e., CMC Corp and Telecoms Informatics go up and down completely randomly.

Pair Corralation between CMC Corp and Telecoms Informatics

Assuming the 90 days trading horizon CMC Corp is expected to generate 2.27 times less return on investment than Telecoms Informatics. But when comparing it to its historical volatility, CMC Corp is 1.01 times less risky than Telecoms Informatics. It trades about 0.12 of its potential returns per unit of risk. Telecoms Informatics JSC is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,250,000  in Telecoms Informatics JSC on September 27, 2024 and sell it today you would earn a total of  150,000  from holding Telecoms Informatics JSC or generate 12.0% return on investment over 90 days.

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

CMC Corp  vs.  Telecoms Informatics JSC

CMC Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CMC Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, CMC Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Telecoms Informatics JSC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telecoms Informatics JSC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Telecoms Informatics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMC Corp and Telecoms Informatics

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

The idea behind CMC Corp and Telecoms Informatics 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.