Correlation Between CSL and CSL

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

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

Diversification Opportunities for CSL and CSL

0.65

Correlation Coefficient

CSL  CSL

Poor diversification

The 3 months correlation between CSL and CSL is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding CSL and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited and CSL 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 CSL are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of CSL i.e., CSL and CSL go up and down completely randomly.

Pair Corralation between CSL and CSL

Assuming the 90 days horizon CSL is expected to generate 1.39 times less return on investment than CSL. But when comparing it to its historical volatility, CSL is 2.3 times less risky than CSL. It trades about 0.39 of its potential returns per unit of risk. CSL Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  14,733  in CSL Limited on April 26, 2025 and sell it today you would earn a total of  2,767  from holding CSL Limited or generate 18.78% return on investment over 90 days.

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

CSL  vs.  CSL Limited

CSL

Risk-Adjusted Performance

Good

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

CSL Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CSL Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, CSL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSL and CSL

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

The idea behind CSL and CSL Limited 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.