Correlation Between CPL Group and Fancy Wood

Can any of the company-specific risk be diversified away by investing in both CPL Group and Fancy Wood 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 CPL Group and Fancy Wood into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CPL Group Public and Fancy Wood Industries, you can compare the effects of market volatilities on CPL Group and Fancy Wood 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 CPL Group with a short position of Fancy Wood. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPL Group and Fancy Wood.

Diversification Opportunities for CPL Group and Fancy Wood

0.44

Correlation Coefficient

CPL Group  Fancy Wood

Very weak diversification

The 3 months correlation between CPL and Fancy is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CPL Group Public and Fancy Wood Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fancy Wood Industries and CPL Group 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 CPL Group Public are associated (or correlated) with Fancy Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fancy Wood Industries has no effect on the direction of CPL Group i.e., CPL Group and Fancy Wood go up and down completely randomly.

Pair Corralation between CPL Group and Fancy Wood

Assuming the 90 days trading horizon CPL Group Public is expected to under-perform the Fancy Wood. In addition to that, CPL Group is 1.11 times more volatile than Fancy Wood Industries. It trades about -0.07 of its total potential returns per unit of risk. Fancy Wood Industries is currently generating about 0.02 per unit of volatility. If you would invest  38.00  in Fancy Wood Industries on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Fancy Wood Industries or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

CPL Group Public  vs.  Fancy Wood Industries

CPL Group Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days CPL Group Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Fancy Wood Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fancy Wood Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Fancy Wood is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CPL Group and Fancy Wood

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

The idea behind CPL Group Public and Fancy Wood Industries 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.