Correlation Between Audius and CMT

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

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

Diversification Opportunities for Audius and CMT

0.43

Correlation Coefficient

Audius  CMT

Very weak diversification

The 24 months correlation between Audius and CMT is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Audius and CMT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMT and Audius 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 Audius are associated (or correlated) with CMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMT has no effect on the direction of Audius i.e., Audius and CMT go up and down completely randomly.

Pair Corralation between Audius and CMT

Assuming the 90 days trading horizon Audius is expected to under-perform the CMT. In addition to that, Audius is 2.26 times more volatile than CMT. It trades about -0.25 of its total potential returns per unit of risk. CMT is currently generating about -0.11 per unit of volatility. If you would invest  0.55  in CMT on February 7, 2024 and sell it today you would lose (0.04) from holding CMT or give up 7.56% of portfolio value over 90 days.

Time Period	24 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Audius  vs.  CMT

Audius

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Audius has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Audius is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

CMT

Risk-Adjusted Performance

3 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CMT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CMT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Audius and CMT

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

The idea behind Audius and CMT 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.