Correlation Between CSP and Metalink

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

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

Diversification Opportunities for CSP and Metalink

0.63

Correlation Coefficient

CSP  Metalink

Poor diversification

The 3 months correlation between CSP and Metalink is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CSP Inc and Metalink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalink and CSP 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 CSP Inc are associated (or correlated) with Metalink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalink has no effect on the direction of CSP i.e., CSP and Metalink go up and down completely randomly.

Pair Corralation between CSP and Metalink

Given the investment horizon of 90 days CSP Inc is expected to generate 18.56 times more return on investment than Metalink. However, CSP is 18.56 times more volatile than Metalink. It trades about 0.11 of its potential returns per unit of risk. Metalink is currently generating about 0.13 per unit of risk. If you would invest  1,298  in CSP Inc on October 24, 2024 and sell it today you would earn a total of  416.00  from holding CSP Inc or generate 32.05% return on investment over 90 days.

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

CSP Inc  vs.  Metalink

CSP Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CSP Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, CSP demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Metalink

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metalink are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Metalink is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CSP and Metalink

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

The idea behind CSP Inc and Metalink 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 Stocks Directory module to find actively traded stocks across global markets.