Correlation Between LUX ISLAND and CIM FINANCIAL

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

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

Diversification Opportunities for LUX ISLAND and CIM FINANCIAL

0.14

Correlation Coefficient

LUX ISLAND  CIM FINANCIAL

Average diversification

The 3 months correlation between LUX and CIM is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding LUX ISLAND RESORTS and CIM FINANCIAL SERVICES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIM FINANCIAL SERVICES and LUX ISLAND 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 LUX ISLAND RESORTS are associated (or correlated) with CIM FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIM FINANCIAL SERVICES has no effect on the direction of LUX ISLAND i.e., LUX ISLAND and CIM FINANCIAL go up and down completely randomly.

Pair Corralation between LUX ISLAND and CIM FINANCIAL

Assuming the 90 days trading horizon LUX ISLAND RESORTS is expected to under-perform the CIM FINANCIAL. But the stock apears to be less risky and, when comparing its historical volatility, LUX ISLAND RESORTS is 2.07 times less risky than CIM FINANCIAL. The stock trades about -0.13 of its potential returns per unit of risk. The CIM FINANCIAL SERVICES is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  1,440  in CIM FINANCIAL SERVICES on December 3, 2024 and sell it today you would earn a total of  210.00  from holding CIM FINANCIAL SERVICES or generate 14.58% return on investment over 90 days.

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

LUX ISLAND RESORTS  vs.  CIM FINANCIAL SERVICES

LUX ISLAND RESORTS

Risk-Adjusted Performance

Very Weak

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

CIM FINANCIAL SERVICES

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CIM FINANCIAL SERVICES are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, CIM FINANCIAL displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LUX ISLAND and CIM FINANCIAL

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

The idea behind LUX ISLAND RESORTS and CIM FINANCIAL SERVICES 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.