Correlation Between CMG Holdings and Papaya Growth

Can any of the company-specific risk be diversified away by investing in both CMG Holdings and Papaya Growth 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 CMG Holdings and Papaya Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CMG Holdings Group and Papaya Growth Opportunity, you can compare the effects of market volatilities on CMG Holdings and Papaya Growth 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 CMG Holdings with a short position of Papaya Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMG Holdings and Papaya Growth.

Diversification Opportunities for CMG Holdings and Papaya Growth

-0.02

Correlation Coefficient

CMG Holdings  Papaya Growth

Good diversification

The 3 months correlation between CMG and Papaya is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding CMG Holdings Group and Papaya Growth Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papaya Growth Opportunity and CMG Holdings 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 CMG Holdings Group are associated (or correlated) with Papaya Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papaya Growth Opportunity has no effect on the direction of CMG Holdings i.e., CMG Holdings and Papaya Growth go up and down completely randomly.

Pair Corralation between CMG Holdings and Papaya Growth

Given the investment horizon of 90 days CMG Holdings Group is expected to generate 123.31 times more return on investment than Papaya Growth. However, CMG Holdings is 123.31 times more volatile than Papaya Growth Opportunity. It trades about 0.01 of its potential returns per unit of risk. Papaya Growth Opportunity is currently generating about 0.14 per unit of risk. If you would invest  0.27  in CMG Holdings Group on September 17, 2024 and sell it today you would lose (0.09) from holding CMG Holdings Group or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

CMG Holdings Group  vs.  Papaya Growth Opportunity

CMG Holdings Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CMG Holdings Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, CMG Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Papaya Growth Opportunity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Papaya Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CMG Holdings and Papaya Growth

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

The idea behind CMG Holdings Group and Papaya Growth Opportunity 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.