Correlation Between CSP and CGI
Can any of the company-specific risk be diversified away by investing in both CSP and CGI 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 CSP and CGI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSP Inc and CGI Inc, you can compare the effects of market volatilities on CSP and CGI 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 CSP with a short position of CGI. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSP and CGI.
Diversification Opportunities for CSP and CGI
Very weak diversification
The 3 months correlation between CSP and CGI is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CSP Inc and CGI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGI Inc and CSP 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 CSP Inc are associated (or correlated) with CGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGI Inc has no effect on the direction of CSP i.e., CSP and CGI go up and down completely randomly.
Pair Corralation between CSP and CGI
Given the investment horizon of 90 days CSP Inc is expected to generate 3.43 times more return on investment than CGI. However, CSP is 3.43 times more volatile than CGI Inc. It trades about 0.08 of its potential returns per unit of risk. CGI Inc is currently generating about 0.05 per unit of risk. If you would invest 343.00 in CSP Inc on January 20, 2024 and sell it today you would earn a total of 1,082 from holding CSP Inc or generate 315.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSP Inc vs. CGI Inc
Performance |
| Timeline |
| CSP Inc |
| CGI Inc |
CSP and CGI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSP and CGI
The main advantage of trading using opposite CSP and CGI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSP position performs unexpectedly, CGI 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 CGI will offset losses from the drop in CGI's long position.| CSP vs. Information Services Group | CSP vs. Home Bancorp | CSP vs. CRA International | CSP vs. Aquagold International |
| CGI vs. Information Services Group | CGI vs. Home Bancorp | CGI vs. CRA International | CGI vs. Aquagold International |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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