Correlation Between Century Synthetic and CMC Corp

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

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

Diversification Opportunities for Century Synthetic and CMC Corp

-0.47

Correlation Coefficient

Century Synthetic  CMC Corp

Very good diversification

The 3 months correlation between Century and CMC is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Century Synthetic Fiber and CMC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Corp and Century Synthetic 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 Century Synthetic Fiber 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 Century Synthetic i.e., Century Synthetic and CMC Corp go up and down completely randomly.

Pair Corralation between Century Synthetic and CMC Corp

Assuming the 90 days trading horizon Century Synthetic Fiber is expected to under-perform the CMC Corp. In addition to that, Century Synthetic is 1.01 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 0.06 per unit of volatility. If you would invest  2,923,230  in CMC Corp on October 10, 2024 and sell it today you would earn a total of  1,891,770  from holding CMC Corp or generate 64.72% return on investment over 90 days.

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

Century Synthetic Fiber  vs.  CMC Corp

Century Synthetic Fiber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Synthetic Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 Century Synthetic and CMC Corp

The main advantage of trading using opposite Century Synthetic and CMC Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Synthetic 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 Century Synthetic Fiber 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.