Correlation Between CTXC and Celo

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

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

Diversification Opportunities for CTXC and Celo

0.7

Correlation Coefficient

CTXC  Celo

Poor diversification

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

Pair Corralation between CTXC and Celo

Assuming the 90 days trading horizon CTXC is expected to generate 1.13 times less return on investment than Celo. But when comparing it to its historical volatility, CTXC is 1.03 times less risky than Celo. It trades about 0.11 of its potential returns per unit of risk. Celo is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Celo on August 4, 2024 and sell it today you would earn a total of  17.00  from holding Celo or generate 39.53% return on investment over 90 days.

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

CTXC  vs.  Celo

CTXC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CTXC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, CTXC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Celo

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Celo are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Celo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTXC and Celo

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

The idea behind CTXC and Celo 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.