Correlation Between Cardno and Steamships Trading

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

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

Diversification Opportunities for Cardno and Steamships Trading

0.75

Correlation Coefficient

Cardno  Steamships Trading

Poor diversification

The 3 months correlation between Cardno and Steamships is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cardno and Steamships Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steamships Trading and Cardno 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 Cardno are associated (or correlated) with Steamships Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steamships Trading has no effect on the direction of Cardno i.e., Cardno and Steamships Trading go up and down completely randomly.

Pair Corralation between Cardno and Steamships Trading

Assuming the 90 days trading horizon Cardno is expected to generate 14.17 times more return on investment than Steamships Trading. However, Cardno is 14.17 times more volatile than Steamships Trading. It trades about 0.26 of its potential returns per unit of risk. Steamships Trading is currently generating about 0.05 per unit of risk. If you would invest  26.00  in Cardno on February 21, 2024 and sell it today you would earn a total of  16.00  from holding Cardno or generate 61.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Cardno  vs.  Steamships Trading

Cardno

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardno are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Cardno unveiled solid returns over the last few months and may actually be approaching a breakup point.

Steamships Trading

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Steamships Trading are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Steamships Trading unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardno and Steamships Trading

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

The idea behind Cardno and Steamships Trading 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.