Correlation Between Capital ICE and Capital Ice

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

By analyzing existing cross correlation between Capital ICE International15 and Capital Ice 7, you can compare the effects of market volatilities on Capital ICE and Capital Ice 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 Capital ICE with a short position of Capital Ice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital ICE and Capital Ice.

Diversification Opportunities for Capital ICE and Capital Ice

-0.37

Correlation Coefficient

Capital ICE  Capital Ice

Very good diversification

The 3 months correlation between Capital and Capital is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Capital ICE International15 and Capital Ice 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Ice 7 and Capital ICE 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 Capital ICE International15 are associated (or correlated) with Capital Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Ice 7 has no effect on the direction of Capital ICE i.e., Capital ICE and Capital Ice go up and down completely randomly.

Pair Corralation between Capital ICE and Capital Ice

Assuming the 90 days trading horizon Capital ICE International15 is expected to under-perform the Capital Ice. In addition to that, Capital ICE is 1.03 times more volatile than Capital Ice 7. It trades about 0.0 of its total potential returns per unit of risk. Capital Ice 7 is currently generating about 0.07 per unit of volatility. If you would invest  4,116  in Capital Ice 7 on December 5, 2024 and sell it today you would earn a total of  161.00  from holding Capital Ice 7 or generate 3.91% return on investment over 90 days.

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

Capital ICE International15  vs.  Capital Ice 7

Capital ICE Internat

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital ICE International15 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Capital ICE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Capital Ice 7

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Ice 7 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Capital Ice is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Capital ICE and Capital Ice

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

The idea behind Capital ICE International15 and Capital Ice 7 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.