Correlation Between Cymbria and Goodfellow

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

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

Diversification Opportunities for Cymbria and Goodfellow

-0.45

Correlation Coefficient

Cymbria  Goodfellow

Very good diversification

The 3 months correlation between Cymbria and Goodfellow is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cymbria and Goodfellow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodfellow and Cymbria 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 Cymbria are associated (or correlated) with Goodfellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodfellow has no effect on the direction of Cymbria i.e., Cymbria and Goodfellow go up and down completely randomly.

Pair Corralation between Cymbria and Goodfellow

Assuming the 90 days trading horizon Cymbria is expected to generate 0.44 times more return on investment than Goodfellow. However, Cymbria is 2.27 times less risky than Goodfellow. It trades about 0.06 of its potential returns per unit of risk. Goodfellow is currently generating about 0.02 per unit of risk. If you would invest  5,806  in Cymbria on October 5, 2024 and sell it today you would earn a total of  1,619  from holding Cymbria or generate 27.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cymbria  vs.  Goodfellow

Cymbria

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cymbria are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Cymbria is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Goodfellow

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goodfellow has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Cymbria and Goodfellow

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

The idea behind Cymbria and Goodfellow 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.