Correlation Between Security National and CNFinance Holdings

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

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

Diversification Opportunities for Security National and CNFinance Holdings

0.3

Correlation Coefficient

Security National  CNFinance Holdings

Weak diversification

The 3 months correlation between Security and CNFinance is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Security National Financial and CNFinance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNFinance Holdings and Security National 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 Security National Financial are associated (or correlated) with CNFinance Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNFinance Holdings has no effect on the direction of Security National i.e., Security National and CNFinance Holdings go up and down completely randomly.

Pair Corralation between Security National and CNFinance Holdings

Assuming the 90 days horizon Security National Financial is expected to generate 0.34 times more return on investment than CNFinance Holdings. However, Security National Financial is 2.96 times less risky than CNFinance Holdings. It trades about 0.01 of its potential returns per unit of risk. CNFinance Holdings is currently generating about -0.03 per unit of risk. If you would invest  1,212  in Security National Financial on December 30, 2024 and sell it today you would earn a total of  3.00  from holding Security National Financial or generate 0.25% return on investment over 90 days.

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

Security National Financial  vs.  CNFinance Holdings

Security National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Security National Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Security National is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CNFinance Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNFinance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Security National and CNFinance Holdings

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

The idea behind Security National Financial and CNFinance Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.