Correlation Between Cymbria and Uniteds

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Can any of the company-specific risk be diversified away by investing in both Cymbria and Uniteds 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 Uniteds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cymbria and Uniteds Limited, you can compare the effects of market volatilities on Cymbria and Uniteds 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 Uniteds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cymbria and Uniteds.

Diversification Opportunities for Cymbria and Uniteds

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Cymbria and Uniteds is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cymbria and Uniteds Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uniteds Limited 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 Uniteds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uniteds Limited has no effect on the direction of Cymbria i.e., Cymbria and Uniteds go up and down completely randomly.

Pair Corralation between Cymbria and Uniteds

Assuming the 90 days trading horizon Cymbria is expected to under-perform the Uniteds. In addition to that, Cymbria is 1.14 times more volatile than Uniteds Limited. It trades about -0.16 of its total potential returns per unit of risk. Uniteds Limited is currently generating about 0.02 per unit of volatility. If you would invest  13,055  in Uniteds Limited on October 6, 2024 and sell it today you would earn a total of  45.00  from holding Uniteds Limited or generate 0.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Cymbria  vs.  Uniteds Limited

 Performance 
       Timeline  
Cymbria 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Cymbria are ranked lower than 2 (%) 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.
Uniteds Limited 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Uniteds Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Uniteds is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Cymbria and Uniteds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cymbria and Uniteds

The main advantage of trading using opposite Cymbria and Uniteds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cymbria position performs unexpectedly, Uniteds 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 Uniteds will offset losses from the drop in Uniteds' long position.
The idea behind Cymbria and Uniteds Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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