Correlation Between CP ALL and United Paper

Can any of the company-specific risk be diversified away by investing in both CP ALL and United Paper 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 CP ALL and United Paper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CP ALL Public and United Paper Public, you can compare the effects of market volatilities on CP ALL and United Paper 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 CP ALL with a short position of United Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of CP ALL and United Paper.

Diversification Opportunities for CP ALL and United Paper

-0.49

Correlation Coefficient

CP ALL  United Paper

Very good diversification

The 3 months correlation between CPALL and United is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and United Paper Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Paper Public and CP ALL 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 CP ALL Public are associated (or correlated) with United Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Paper Public has no effect on the direction of CP ALL i.e., CP ALL and United Paper go up and down completely randomly.

Pair Corralation between CP ALL and United Paper

Assuming the 90 days trading horizon CP ALL Public is expected to under-perform the United Paper. In addition to that, CP ALL is 2.44 times more volatile than United Paper Public. It trades about -0.05 of its total potential returns per unit of risk. United Paper Public is currently generating about 0.11 per unit of volatility. If you would invest  742.00  in United Paper Public on December 23, 2024 and sell it today you would earn a total of  53.00  from holding United Paper Public or generate 7.14% return on investment over 90 days.

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

CP ALL Public  vs.  United Paper Public

CP ALL Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days CP ALL Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

United Paper Public

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Paper Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, United Paper may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CP ALL and United Paper

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

The idea behind CP ALL Public and United Paper Public 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.