Correlation Between CP ALL and EI Du

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

By analyzing existing cross correlation between CP ALL Public and EI du Pont, you can compare the effects of market volatilities on CP ALL and EI Du 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 CP ALL with a short position of EI Du. Check out your portfolio center. Please also check ongoing floating volatility patterns of CP ALL and EI Du.

Diversification Opportunities for CP ALL and EI Du

-0.53

Correlation Coefficient

CP ALL  EI Du

Excellent diversification

The 3 months correlation between CVPBF and CTA-P-A is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and EI du Pont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EI du Pont and CP ALL 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 CP ALL Public are associated (or correlated) with EI Du. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EI du Pont has no effect on the direction of CP ALL i.e., CP ALL and EI Du go up and down completely randomly.

Pair Corralation between CP ALL and EI Du

Assuming the 90 days horizon CP ALL Public is expected to under-perform the EI Du. In addition to that, CP ALL is 2.96 times more volatile than EI du Pont. It trades about -0.02 of its total potential returns per unit of risk. EI du Pont is currently generating about 0.05 per unit of volatility. If you would invest  5,610  in EI du Pont on December 22, 2024 and sell it today you would earn a total of  138.00  from holding EI du Pont or generate 2.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	70.0%
Values	Daily Returns

CP ALL Public  vs.  EI du Pont

CP ALL Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days CP ALL Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, CP ALL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

EI du Pont

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EI du Pont are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, EI Du is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CP ALL and EI Du

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

The idea behind CP ALL Public and EI du Pont 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.