Correlation Between PVI Reinsurance and CMC Corp

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

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

Diversification Opportunities for PVI Reinsurance and CMC Corp

-0.36

Correlation Coefficient

PVI Reinsurance  CMC Corp

Very good diversification

The 3 months correlation between PVI and CMC is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding PVI Reinsurance Corp and CMC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Corp and PVI Reinsurance 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 PVI Reinsurance Corp are associated (or correlated) with CMC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Corp has no effect on the direction of PVI Reinsurance i.e., PVI Reinsurance and CMC Corp go up and down completely randomly.

Pair Corralation between PVI Reinsurance and CMC Corp

Assuming the 90 days trading horizon PVI Reinsurance is expected to generate 3.06 times less return on investment than CMC Corp. In addition to that, PVI Reinsurance is 1.25 times more volatile than CMC Corp. It trades about 0.01 of its total potential returns per unit of risk. CMC Corp is currently generating about 0.05 per unit of volatility. If you would invest  2,986,472  in CMC Corp on October 27, 2024 and sell it today you would earn a total of  1,723,528  from holding CMC Corp or generate 57.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.27%
Values	Daily Returns

PVI Reinsurance Corp  vs.  CMC Corp

PVI Reinsurance Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PVI Reinsurance Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, PVI Reinsurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CMC Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CMC Corp 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, CMC Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PVI Reinsurance and CMC Corp

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

The idea behind PVI Reinsurance Corp and CMC Corp 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 Commodity Directory module to find actively traded commodities issued by global exchanges.