Correlation Between CVP and WOO Network

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

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

Diversification Opportunities for CVP and WOO Network

0.68

Correlation Coefficient

CVP  WOO Network

Poor diversification

The 3 months correlation between CVP and WOO is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CVP and WOO Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WOO Network and CVP 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 CVP are associated (or correlated) with WOO Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WOO Network has no effect on the direction of CVP i.e., CVP and WOO Network go up and down completely randomly.

Pair Corralation between CVP and WOO Network

Assuming the 90 days trading horizon CVP is expected to generate 10.53 times more return on investment than WOO Network. However, CVP is 10.53 times more volatile than WOO Network. It trades about 0.15 of its potential returns per unit of risk. WOO Network is currently generating about 0.2 per unit of risk. If you would invest  3.11  in CVP on September 1, 2024 and sell it today you would earn a total of  10.89  from holding CVP or generate 350.16% return on investment over 90 days.

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

CVP  vs.  WOO Network

CVP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CVP exhibited solid returns over the last few months and may actually be approaching a breakup point.

WOO Network

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with CVP and WOO Network

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

The idea behind CVP and WOO Network 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.