Correlation Between Financial and CI Galaxy

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

By analyzing existing cross correlation between Financial 15 Split and CI Galaxy Multi Crypto, you can compare the effects of market volatilities on Financial and CI Galaxy 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 Financial with a short position of CI Galaxy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and CI Galaxy.

Diversification Opportunities for Financial and CI Galaxy

0.83

Correlation Coefficient

Financial  CI Galaxy

Very poor diversification

The 3 months correlation between Financial and CMCX-B is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and CI Galaxy Multi Crypto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Galaxy Multi and Financial 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 Financial 15 Split are associated (or correlated) with CI Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Galaxy Multi has no effect on the direction of Financial i.e., Financial and CI Galaxy go up and down completely randomly.

Pair Corralation between Financial and CI Galaxy

Assuming the 90 days trading horizon Financial is expected to generate 3.12 times less return on investment than CI Galaxy. But when comparing it to its historical volatility, Financial 15 Split is 2.29 times less risky than CI Galaxy. It trades about 0.15 of its potential returns per unit of risk. CI Galaxy Multi Crypto is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,124  in CI Galaxy Multi Crypto on September 22, 2024 and sell it today you would earn a total of  501.00  from holding CI Galaxy Multi Crypto or generate 44.57% return on investment over 90 days.

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

Financial 15 Split  vs.  CI Galaxy Multi Crypto

Financial 15 Split

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CI Galaxy Multi

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CI Galaxy Multi Crypto are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, CI Galaxy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financial and CI Galaxy

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

The idea behind Financial 15 Split and CI Galaxy Multi Crypto 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.