Correlation Between CI Short and CI Investment

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

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

Diversification Opportunities for CI Short and CI Investment

0.43

Correlation Coefficient

CI Short  CI Investment

Very weak diversification

The 3 months correlation between FGB and FIG is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CI Short Term and CI Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Investment Grade and CI Short 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 CI Short Term are associated (or correlated) with CI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Investment Grade has no effect on the direction of CI Short i.e., CI Short and CI Investment go up and down completely randomly.

Pair Corralation between CI Short and CI Investment

Assuming the 90 days trading horizon CI Short is expected to generate 15.3 times less return on investment than CI Investment. But when comparing it to its historical volatility, CI Short Term is 1.97 times less risky than CI Investment. It trades about 0.01 of its potential returns per unit of risk. CI Investment Grade is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  944.00  in CI Investment Grade on September 12, 2024 and sell it today you would earn a total of  9.00  from holding CI Investment Grade or generate 0.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

CI Short Term  vs.  CI Investment Grade

CI Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CI Short Term has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, CI Short is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CI Investment Grade

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with CI Short and CI Investment

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

The idea behind CI Short Term and CI Investment Grade 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.