Correlation Between First Asset and CI Lawrence

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

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

Diversification Opportunities for First Asset and CI Lawrence

0.25

Correlation Coefficient

First Asset  CI Lawrence

Modest diversification

The 3 months correlation between First and CRED is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Energy and CI Lawrence Park in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Lawrence Park and First Asset 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 First Asset Energy are associated (or correlated) with CI Lawrence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Lawrence Park has no effect on the direction of First Asset i.e., First Asset and CI Lawrence go up and down completely randomly.

Pair Corralation between First Asset and CI Lawrence

Assuming the 90 days trading horizon First Asset is expected to generate 1.07 times less return on investment than CI Lawrence. In addition to that, First Asset is 5.72 times more volatile than CI Lawrence Park. It trades about 0.08 of its total potential returns per unit of risk. CI Lawrence Park is currently generating about 0.49 per unit of volatility. If you would invest  2,004  in CI Lawrence Park on September 5, 2024 and sell it today you would earn a total of  30.00  from holding CI Lawrence Park or generate 1.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

First Asset Energy  vs.  CI Lawrence Park

First Asset Energy

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Asset Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, First Asset is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

CI Lawrence Park

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CI Lawrence Park are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Lawrence is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Asset and CI Lawrence

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

The idea behind First Asset Energy and CI Lawrence Park 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.