Correlation Between True USD and CEL

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

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

Diversification Opportunities for True USD and CEL

0.35

Correlation Coefficient

True USD  CEL

Weak diversification

The 3 months correlation between True and CEL is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding True USD and CEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEL and True USD 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 True USD are associated (or correlated) with CEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEL has no effect on the direction of True USD i.e., True USD and CEL go up and down completely randomly.

Pair Corralation between True USD and CEL

Assuming the 90 days trading horizon True USD is expected to generate 772.17 times less return on investment than CEL. But when comparing it to its historical volatility, True USD is 42.13 times less risky than CEL. It trades about 0.0 of its potential returns per unit of risk. CEL is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  209.00  in CEL on January 20, 2024 and sell it today you would lose (194.00) from holding CEL or give up 92.82% of portfolio value over 90 days.

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

True USD  vs.  CEL

True USD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in True USD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, True USD is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

CEL

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with True USD and CEL

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

The idea behind True USD and CEL 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.