Correlation Between Young Cos and Cembra Money

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

By analyzing existing cross correlation between Young Cos Brewery and Cembra Money Bank, you can compare the effects of market volatilities on Young Cos and Cembra Money 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 Young Cos with a short position of Cembra Money. Check out your portfolio center. Please also check ongoing floating volatility patterns of Young Cos and Cembra Money.

Diversification Opportunities for Young Cos and Cembra Money

0.7

Correlation Coefficient

Young Cos  Cembra Money

Poor diversification

The 3 months correlation between Young and Cembra is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Young Cos Brewery and Cembra Money Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cembra Money Bank and Young Cos 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 Young Cos Brewery are associated (or correlated) with Cembra Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cembra Money Bank has no effect on the direction of Young Cos i.e., Young Cos and Cembra Money go up and down completely randomly.

Pair Corralation between Young Cos and Cembra Money

Assuming the 90 days trading horizon Young Cos Brewery is expected to generate 1.29 times more return on investment than Cembra Money. However, Young Cos is 1.29 times more volatile than Cembra Money Bank. It trades about 0.05 of its potential returns per unit of risk. Cembra Money Bank is currently generating about 0.06 per unit of risk. If you would invest  62,847  in Young Cos Brewery on September 21, 2024 and sell it today you would earn a total of  953.00  from holding Young Cos Brewery or generate 1.52% return on investment over 90 days.

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

Young Cos Brewery  vs.  Cembra Money Bank

Young Cos Brewery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Young Cos Brewery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Young Cos is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cembra Money Bank

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cembra Money Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cembra Money is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Young Cos and Cembra Money

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

The idea behind Young Cos Brewery and Cembra Money Bank 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 Global Correlations module to find global opportunities by holding instruments from different markets.