Correlation Between Economic Investment and Cymbria

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

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

Diversification Opportunities for Economic Investment and Cymbria

0.63

Correlation Coefficient

Economic Investment  Cymbria

Poor diversification

The 3 months correlation between Economic and Cymbria is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust and Cymbria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cymbria and Economic Investment 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 Economic Investment Trust are associated (or correlated) with Cymbria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cymbria has no effect on the direction of Economic Investment i.e., Economic Investment and Cymbria go up and down completely randomly.

Pair Corralation between Economic Investment and Cymbria

Assuming the 90 days trading horizon Economic Investment Trust is expected to generate 1.2 times more return on investment than Cymbria. However, Economic Investment is 1.2 times more volatile than Cymbria. It trades about 0.21 of its potential returns per unit of risk. Cymbria is currently generating about 0.07 per unit of risk. If you would invest  16,384  in Economic Investment Trust on December 2, 2024 and sell it today you would earn a total of  2,066  from holding Economic Investment Trust or generate 12.61% return on investment over 90 days.

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

Economic Investment Trust  vs.  Cymbria

Economic Investment Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Economic Investment Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Economic Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cymbria

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cymbria are ranked lower than 1 (%) 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.

Pair Trading with Economic Investment and Cymbria

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

The idea behind Economic Investment Trust and Cymbria 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.