Correlation Between Stellar and CMUV Bancorp

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

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

Diversification Opportunities for Stellar and CMUV Bancorp

-0.25

Correlation Coefficient

Stellar  CMUV Bancorp

Very good diversification

The 3 months correlation between Stellar and CMUV is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and CMUV Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMUV Bancorp and Stellar 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 Stellar are associated (or correlated) with CMUV Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMUV Bancorp has no effect on the direction of Stellar i.e., Stellar and CMUV Bancorp go up and down completely randomly.

Pair Corralation between Stellar and CMUV Bancorp

Assuming the 90 days trading horizon Stellar is expected to generate 7.0 times more return on investment than CMUV Bancorp. However, Stellar is 7.0 times more volatile than CMUV Bancorp. It trades about 0.24 of its potential returns per unit of risk. CMUV Bancorp is currently generating about 0.15 per unit of risk. If you would invest  9.66  in Stellar on October 27, 2024 and sell it today you would earn a total of  33.34  from holding Stellar or generate 345.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.63%
Values	Daily Returns

Stellar  vs.  CMUV Bancorp

Stellar

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

CMUV Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CMUV Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, CMUV Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stellar and CMUV Bancorp

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

The idea behind Stellar and CMUV Bancorp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.