Correlation Between Premier Investments and CSL

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

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

Diversification Opportunities for Premier Investments and CSL

-0.68

Correlation Coefficient

Premier Investments  CSL

Excellent diversification

The 3 months correlation between Premier and CSL is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Premier Investments and CSL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL and Premier Investments 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 Premier Investments are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL has no effect on the direction of Premier Investments i.e., Premier Investments and CSL go up and down completely randomly.

Pair Corralation between Premier Investments and CSL

Assuming the 90 days trading horizon Premier Investments is expected to under-perform the CSL. In addition to that, Premier Investments is 1.89 times more volatile than CSL. It trades about -0.17 of its total potential returns per unit of risk. CSL is currently generating about 0.23 per unit of volatility. If you would invest  27,961  in CSL on October 12, 2024 and sell it today you would earn a total of  794.00  from holding CSL or generate 2.84% return on investment over 90 days.

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

Premier Investments  vs.  CSL

Premier Investments

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Premier Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CSL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, CSL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Premier Investments and CSL

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

The idea behind Premier Investments and CSL 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.