Correlation Between CMG Cleantech and High Co

Can any of the company-specific risk be diversified away by investing in both CMG Cleantech and High Co 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 High Co 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 High Co SA, you can compare the effects of market volatilities on CMG Cleantech and High Co 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 High Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMG Cleantech and High Co.

Diversification Opportunities for CMG Cleantech and High Co

-0.6

Correlation Coefficient

CMG Cleantech  High Co

Excellent diversification

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

Pair Corralation between CMG Cleantech and High Co

Assuming the 90 days trading horizon CMG Cleantech SA is expected to under-perform the High Co. In addition to that, CMG Cleantech is 1.48 times more volatile than High Co SA. It trades about -0.13 of its total potential returns per unit of risk. High Co SA is currently generating about 0.24 per unit of volatility. If you would invest  235.00  in High Co SA on October 23, 2024 and sell it today you would earn a total of  16.00  from holding High Co SA or generate 6.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

CMG Cleantech SA  vs.  High Co SA

CMG Cleantech SA

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CMG Cleantech SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, CMG Cleantech is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

High Co SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Co SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, High Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CMG Cleantech and High Co

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

The idea behind CMG Cleantech SA and High Co SA 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.