Correlation Between City View and Now Corp

Can any of the company-specific risk be diversified away by investing in both City View and Now 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 Now 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 Now Corp, you can compare the effects of market volatilities on City View and Now 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 Now Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of City View and Now Corp.

Diversification Opportunities for City View and Now Corp

-0.3

Correlation Coefficient

City View  Now Corp

Very good diversification

The 3 months correlation between City and Now is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding City View Green and Now Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Now 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 Now Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Now Corp has no effect on the direction of City View i.e., City View and Now Corp go up and down completely randomly.

Pair Corralation between City View and Now Corp

Assuming the 90 days horizon City View Green is expected to under-perform the Now Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, City View Green is 1.23 times less risky than Now Corp. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Now Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Now Corp on October 9, 2024 and sell it today you would earn a total of  0.01  from holding Now Corp or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

City View Green  vs.  Now Corp

City View Green

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in City View Green are ranked lower than 3 (%) 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.

Now Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Now Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Now Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with City View and Now Corp

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

The idea behind City View Green and Now 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .