Correlation Between Maker and CEL

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

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

Diversification Opportunities for Maker and CEL

0.08

Correlation Coefficient

Maker  CEL

Significant diversification

The 3 months correlation between Maker and CEL is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Maker and CEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEL and Maker 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 Maker are associated (or correlated) with CEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEL has no effect on the direction of Maker i.e., Maker and CEL go up and down completely randomly.

Pair Corralation between Maker and CEL

Assuming the 90 days trading horizon Maker is expected to generate 16.02 times less return on investment than CEL. But when comparing it to its historical volatility, Maker is 4.39 times less risky than CEL. It trades about 0.02 of its potential returns per unit of risk. CEL is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  19.00  in CEL on December 28, 2024 and sell it today you would lose (9.80) from holding CEL or give up 51.58% of portfolio value over 90 days.

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

Maker  vs.  CEL

Maker

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Maker are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Maker may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CEL

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CEL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, CEL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Maker and CEL

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

The idea behind Maker and CEL 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.