Correlation Between City View and Allied Corp

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

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

Diversification Opportunities for City View and Allied Corp

0.03

Correlation Coefficient

City View  Allied Corp

Significant diversification

The 3 months correlation between City and Allied is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding City View Green and Allied Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Corp and City View 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 View Green are associated (or correlated) with Allied Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Corp has no effect on the direction of City View i.e., City View and Allied Corp go up and down completely randomly.

Pair Corralation between City View and Allied Corp

Assuming the 90 days horizon City View Green is expected to generate 10.96 times more return on investment than Allied Corp. However, City View is 10.96 times more volatile than Allied Corp. It trades about 0.31 of its potential returns per unit of risk. Allied Corp is currently generating about -0.2 per unit of risk. If you would invest  0.26  in City View Green on October 23, 2024 and sell it today you would earn a total of  0.52  from holding City View Green or generate 200.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

City View Green  vs.  Allied Corp

City View Green

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in City View Green are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, City View reported solid returns over the last few months and may actually be approaching a breakup point.

Allied Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Corp 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 forward indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with City View and Allied Corp

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

The idea behind City View Green and Allied Corp 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.