Correlation Between CI First and BetaPro Crude

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

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

Diversification Opportunities for CI First and BetaPro Crude

0.43

Correlation Coefficient

CI First  BetaPro Crude

Very weak diversification

The 3 months correlation between MXF and BetaPro is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CI First Asset and BetaPro Crude Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Crude Oil and CI First 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 CI First Asset are associated (or correlated) with BetaPro Crude. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Crude Oil has no effect on the direction of CI First i.e., CI First and BetaPro Crude go up and down completely randomly.

Pair Corralation between CI First and BetaPro Crude

Assuming the 90 days trading horizon CI First Asset is expected to generate 0.51 times more return on investment than BetaPro Crude. However, CI First Asset is 1.95 times less risky than BetaPro Crude. It trades about 0.33 of its potential returns per unit of risk. BetaPro Crude Oil is currently generating about 0.0 per unit of risk. If you would invest  990.00  in CI First Asset on December 29, 2024 and sell it today you would earn a total of  336.00  from holding CI First Asset or generate 33.94% return on investment over 90 days.

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

CI First Asset  vs.  BetaPro Crude Oil

CI First Asset

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CI First Asset are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, CI First displayed solid returns over the last few months and may actually be approaching a breakup point.

BetaPro Crude Oil

Risk-Adjusted Performance

Very Weak

Over the last 90 days BetaPro Crude Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, BetaPro Crude is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CI First and BetaPro Crude

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

The idea behind CI First Asset and BetaPro Crude Oil 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.