Correlation Between CD Projekt and CNFinance Holdings

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

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

Diversification Opportunities for CD Projekt and CNFinance Holdings

-0.44

Correlation Coefficient

CD Projekt  CNFinance Holdings

Very good diversification

The 3 months correlation between OTGLF and CNFinance is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CD Projekt SA and CNFinance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNFinance Holdings and CD Projekt 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 CD Projekt SA are associated (or correlated) with CNFinance Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNFinance Holdings has no effect on the direction of CD Projekt i.e., CD Projekt and CNFinance Holdings go up and down completely randomly.

Pair Corralation between CD Projekt and CNFinance Holdings

Assuming the 90 days horizon CD Projekt SA is expected to generate 0.19 times more return on investment than CNFinance Holdings. However, CD Projekt SA is 5.4 times less risky than CNFinance Holdings. It trades about -0.1 of its potential returns per unit of risk. CNFinance Holdings is currently generating about -0.15 per unit of risk. If you would invest  2,851  in CD Projekt SA on January 29, 2024 and sell it today you would lose (26.00) from holding CD Projekt SA or give up 0.91% of portfolio value over 90 days.

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

CD Projekt SA  vs.  CNFinance Holdings

CD Projekt SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CD Projekt SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, CD Projekt reported solid returns over the last few months and may actually be approaching a breakup point.

CNFinance Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNFinance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CD Projekt and CNFinance Holdings

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

The idea behind CD Projekt SA and CNFinance Holdings 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.