Correlation Between CMG Cleantech and Lexibook Linguistic

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

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

Diversification Opportunities for CMG Cleantech and Lexibook Linguistic

0.6

Correlation Coefficient

CMG Cleantech  Lexibook Linguistic

Poor diversification

The 3 months correlation between CMG and Lexibook is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CMG Cleantech SA and Lexibook Linguistic Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexibook Linguistic and CMG Cleantech 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 CMG Cleantech SA are associated (or correlated) with Lexibook Linguistic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexibook Linguistic has no effect on the direction of CMG Cleantech i.e., CMG Cleantech and Lexibook Linguistic go up and down completely randomly.

Pair Corralation between CMG Cleantech and Lexibook Linguistic

Assuming the 90 days trading horizon CMG Cleantech SA is expected to generate 8.28 times more return on investment than Lexibook Linguistic. However, CMG Cleantech is 8.28 times more volatile than Lexibook Linguistic Electronic. It trades about 0.15 of its potential returns per unit of risk. Lexibook Linguistic Electronic is currently generating about 0.1 per unit of risk. If you would invest  100.00  in CMG Cleantech SA on September 13, 2024 and sell it today you would earn a total of  28.00  from holding CMG Cleantech SA or generate 28.0% return on investment over 90 days.

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

CMG Cleantech SA  vs.  Lexibook Linguistic Electronic

CMG Cleantech SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CMG Cleantech SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CMG Cleantech reported solid returns over the last few months and may actually be approaching a breakup point.

Lexibook Linguistic

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lexibook Linguistic Electronic are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Lexibook Linguistic is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CMG Cleantech and Lexibook Linguistic

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

The idea behind CMG Cleantech SA and Lexibook Linguistic Electronic 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.