Correlation Between Cypress Development and American CuMo

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

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

Diversification Opportunities for Cypress Development and American CuMo

0.72

Correlation Coefficient

Cypress Development  American CuMo

Poor diversification

The 3 months correlation between Cypress and American is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cypress Development Corp and American CuMo Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American CuMo Mining and Cypress Development 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 Cypress Development Corp are associated (or correlated) with American CuMo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American CuMo Mining has no effect on the direction of Cypress Development i.e., Cypress Development and American CuMo go up and down completely randomly.

Pair Corralation between Cypress Development and American CuMo

Assuming the 90 days horizon Cypress Development Corp is expected to under-perform the American CuMo. But the otc stock apears to be less risky and, when comparing its historical volatility, Cypress Development Corp is 3.6 times less risky than American CuMo. The otc stock trades about -0.02 of its potential returns per unit of risk. The American CuMo Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3.00  in American CuMo Mining on October 25, 2024 and sell it today you would lose (1.50) from holding American CuMo Mining or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Cypress Development Corp  vs.  American CuMo Mining

Cypress Development Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cypress Development Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

American CuMo Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American CuMo Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, American CuMo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cypress Development and American CuMo

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

The idea behind Cypress Development Corp and American CuMo Mining 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.