Correlation Between M2M GROUP and CFG BANK

Can any of the company-specific risk be diversified away by investing in both M2M GROUP and CFG BANK 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 M2M GROUP and CFG BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between M2M GROUP and CFG BANK, you can compare the effects of market volatilities on M2M GROUP and CFG BANK 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 M2M GROUP with a short position of CFG BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of M2M GROUP and CFG BANK.

Diversification Opportunities for M2M GROUP and CFG BANK

0.17

Correlation Coefficient

M2M GROUP  CFG BANK

Average diversification

The 3 months correlation between M2M and CFG is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding M2M GROUP and CFG BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CFG BANK and M2M GROUP 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 M2M GROUP are associated (or correlated) with CFG BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CFG BANK has no effect on the direction of M2M GROUP i.e., M2M GROUP and CFG BANK go up and down completely randomly.

Pair Corralation between M2M GROUP and CFG BANK

Assuming the 90 days trading horizon M2M GROUP is expected to generate 2.42 times less return on investment than CFG BANK. In addition to that, M2M GROUP is 1.62 times more volatile than CFG BANK. It trades about 0.05 of its total potential returns per unit of risk. CFG BANK is currently generating about 0.19 per unit of volatility. If you would invest  17,610  in CFG BANK on September 12, 2024 and sell it today you would earn a total of  3,400  from holding CFG BANK or generate 19.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

M2M GROUP  vs.  CFG BANK

M2M GROUP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in M2M GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, M2M GROUP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CFG BANK

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CFG BANK are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, CFG BANK displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with M2M GROUP and CFG BANK

The main advantage of trading using opposite M2M GROUP and CFG BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M2M GROUP position performs unexpectedly, CFG BANK 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 CFG BANK will offset losses from the drop in CFG BANK's long position.

The idea behind M2M GROUP and CFG BANK 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.