Correlation Between CNA Financial and MicroAlgo

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

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

Diversification Opportunities for CNA Financial and MicroAlgo

-0.03

Correlation Coefficient

CNA Financial  MicroAlgo

Good diversification

The 3 months correlation between CNA and MicroAlgo is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding CNA Financial and MicroAlgo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroAlgo and CNA Financial 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 CNA Financial are associated (or correlated) with MicroAlgo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroAlgo has no effect on the direction of CNA Financial i.e., CNA Financial and MicroAlgo go up and down completely randomly.

Pair Corralation between CNA Financial and MicroAlgo

Considering the 90-day investment horizon CNA Financial is expected to under-perform the MicroAlgo. But the stock apears to be less risky and, when comparing its historical volatility, CNA Financial is 133.4 times less risky than MicroAlgo. The stock trades about -0.02 of its potential returns per unit of risk. The MicroAlgo is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  72.00  in MicroAlgo on January 27, 2024 and sell it today you would earn a total of  175.00  from holding MicroAlgo or generate 243.06% return on investment over 90 days.

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

CNA Financial  vs.  MicroAlgo

CNA Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

MicroAlgo

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MicroAlgo are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, MicroAlgo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNA Financial and MicroAlgo

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

The idea behind CNA Financial and MicroAlgo 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.