Correlation Between Timken and CSLAU

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

By analyzing existing cross correlation between Timken Company and CSLAU 425 27 APR 32, you can compare the effects of market volatilities on Timken and CSLAU 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 Timken with a short position of CSLAU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and CSLAU.

Diversification Opportunities for Timken and CSLAU

-0.14

Correlation Coefficient

Timken  CSLAU

Good diversification

The 3 months correlation between Timken and CSLAU is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and CSLAU 425 27 APR 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSLAU 425 27 and Timken 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 Timken Company are associated (or correlated) with CSLAU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSLAU 425 27 has no effect on the direction of Timken i.e., Timken and CSLAU go up and down completely randomly.

Pair Corralation between Timken and CSLAU

Considering the 90-day investment horizon Timken Company is expected to generate 2.73 times more return on investment than CSLAU. However, Timken is 2.73 times more volatile than CSLAU 425 27 APR 32. It trades about 0.03 of its potential returns per unit of risk. CSLAU 425 27 APR 32 is currently generating about -0.07 per unit of risk. If you would invest  7,058  in Timken Company on December 30, 2024 and sell it today you would earn a total of  139.00  from holding Timken Company or generate 1.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.97%
Values	Daily Returns

Timken Company  vs.  CSLAU 425 27 APR 32

Timken Company

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Timken Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

CSLAU 425 27

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSLAU 425 27 APR 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CSLAU is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Timken and CSLAU

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

The idea behind Timken Company and CSLAU 425 27 APR 32 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.