Correlation Between NeoMagic and CSP

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

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

Diversification Opportunities for NeoMagic and CSP

0.0

Correlation Coefficient

NeoMagic  CSP

Pay attention - limited upside

The 3 months correlation between NeoMagic and CSP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NeoMagic and CSP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSP Inc and NeoMagic 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 NeoMagic are associated (or correlated) with CSP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSP Inc has no effect on the direction of NeoMagic i.e., NeoMagic and CSP go up and down completely randomly.

Pair Corralation between NeoMagic and CSP

If you would invest  1,644  in CSP Inc on December 19, 2024 and sell it today you would earn a total of  140.00  from holding CSP Inc or generate 8.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

NeoMagic  vs.  CSP Inc

NeoMagic

Risk-Adjusted Performance

Very Weak

Over the last 90 days NeoMagic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, NeoMagic is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

CSP Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSP Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, CSP demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NeoMagic and CSP

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

The idea behind NeoMagic and CSP Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.