Correlation Between CSL and Seven West

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

By analyzing existing cross correlation between CSL LTD SPONADR and Seven West Media, you can compare the effects of market volatilities on CSL and Seven West 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 CSL with a short position of Seven West. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and Seven West.

Diversification Opportunities for CSL and Seven West

0.56

Correlation Coefficient

CSL  Seven West

Very weak diversification

The 3 months correlation between CSL and Seven is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding CSL LTD SPONADR and Seven West Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven West Media and CSL 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 CSL LTD SPONADR are associated (or correlated) with Seven West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven West Media has no effect on the direction of CSL i.e., CSL and Seven West go up and down completely randomly.

Pair Corralation between CSL and Seven West

Assuming the 90 days trading horizon CSL LTD SPONADR is expected to generate 0.32 times more return on investment than Seven West. However, CSL LTD SPONADR is 3.09 times less risky than Seven West. It trades about -0.01 of its potential returns per unit of risk. Seven West Media is currently generating about -0.03 per unit of risk. If you would invest  9,134  in CSL LTD SPONADR on October 24, 2024 and sell it today you would lose (1,084) from holding CSL LTD SPONADR or give up 11.87% of portfolio value over 90 days.

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

CSL LTD SPONADR  vs.  Seven West Media

CSL LTD SPONADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL LTD SPONADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward-looking indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Seven West Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seven West Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Seven West is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CSL and Seven West

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

The idea behind CSL LTD SPONADR and Seven West Media 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.