Correlation Between City Union and Motisons Jewellers

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

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

Diversification Opportunities for City Union and Motisons Jewellers

-0.36

Correlation Coefficient

City Union  Motisons Jewellers

Very good diversification

The 3 months correlation between City and Motisons is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding City Union Bank and Motisons Jewellers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motisons Jewellers and City Union 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 City Union Bank are associated (or correlated) with Motisons Jewellers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motisons Jewellers has no effect on the direction of City Union i.e., City Union and Motisons Jewellers go up and down completely randomly.

Pair Corralation between City Union and Motisons Jewellers

Assuming the 90 days trading horizon City Union is expected to generate 2.2 times less return on investment than Motisons Jewellers. But when comparing it to its historical volatility, City Union Bank is 1.77 times less risky than Motisons Jewellers. It trades about 0.03 of its potential returns per unit of risk. Motisons Jewellers is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,287  in Motisons Jewellers on October 9, 2024 and sell it today you would earn a total of  568.00  from holding Motisons Jewellers or generate 24.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.18%
Values	Daily Returns

City Union Bank  vs.  Motisons Jewellers

City Union Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in City Union Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, City Union may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Motisons Jewellers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Motisons Jewellers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Motisons Jewellers is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with City Union and Motisons Jewellers

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

The idea behind City Union Bank and Motisons Jewellers 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.