Correlation Between Quality Houses and CPN Retail

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

By analyzing existing cross correlation between Quality Houses Property and CPN Retail Growth, you can compare the effects of market volatilities on Quality Houses and CPN Retail 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 Quality Houses with a short position of CPN Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quality Houses and CPN Retail.

Diversification Opportunities for Quality Houses and CPN Retail

0.01

Correlation Coefficient

Quality Houses  CPN Retail

Significant diversification

The 3 months correlation between Quality and CPN is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Quality Houses Property and CPN Retail Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPN Retail Growth and Quality Houses 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 Quality Houses Property are associated (or correlated) with CPN Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPN Retail Growth has no effect on the direction of Quality Houses i.e., Quality Houses and CPN Retail go up and down completely randomly.

Pair Corralation between Quality Houses and CPN Retail

Assuming the 90 days trading horizon Quality Houses Property is expected to under-perform the CPN Retail. But the fund apears to be less risky and, when comparing its historical volatility, Quality Houses Property is 1.89 times less risky than CPN Retail. The fund trades about -0.3 of its potential returns per unit of risk. The CPN Retail Growth is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,210  in CPN Retail Growth on November 29, 2024 and sell it today you would lose (20.00) from holding CPN Retail Growth or give up 1.65% of portfolio value over 90 days.

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

Quality Houses Property  vs.  CPN Retail Growth

Quality Houses Property

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quality Houses Property has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's forward-looking signals remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the fund institutional investors.

CPN Retail Growth

Risk-Adjusted Performance

Weak

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

Pair Trading with Quality Houses and CPN Retail

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

The idea behind Quality Houses Property and CPN Retail Growth 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.