Correlation Between CSL and CSL

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

By analyzing existing cross correlation between CSL and CSL Limited, you can compare the effects of market volatilities on CSL and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and CSL.

Diversification Opportunities for CSL and CSL

0.86

Correlation Coefficient

CSL  CSL

Very poor diversification

The 3 months correlation between CSL and CSL is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CSL and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited 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 are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of CSL i.e., CSL and CSL go up and down completely randomly.

Pair Corralation between CSL and CSL

Assuming the 90 days horizon CSL is expected to under-perform the CSL. But the pink sheet apears to be less risky and, when comparing its historical volatility, CSL is 2.4 times less risky than CSL. The pink sheet trades about -0.21 of its potential returns per unit of risk. The CSL Limited is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  19,155  in CSL Limited on October 25, 2024 and sell it today you would lose (2,424) from holding CSL Limited or give up 12.65% of portfolio value over 90 days.

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

CSL  vs.  CSL Limited

CSL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

CSL Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CSL and CSL

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

The idea behind CSL and CSL Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .