Correlation Between Capital Ice and Giant Manufacturing

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

By analyzing existing cross correlation between Capital Ice 7 and Giant Manufacturing Co, you can compare the effects of market volatilities on Capital Ice and Giant Manufacturing 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 Giant Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Ice and Giant Manufacturing.

Diversification Opportunities for Capital Ice and Giant Manufacturing

-0.12

Correlation Coefficient

Capital Ice  Giant Manufacturing

Good diversification

The 3 months correlation between Capital and Giant is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Capital Ice 7 and Giant Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Giant Manufacturing 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 7 are associated (or correlated) with Giant Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Giant Manufacturing has no effect on the direction of Capital Ice i.e., Capital Ice and Giant Manufacturing go up and down completely randomly.

Pair Corralation between Capital Ice and Giant Manufacturing

Assuming the 90 days trading horizon Capital Ice is expected to generate 31.79 times less return on investment than Giant Manufacturing. But when comparing it to its historical volatility, Capital Ice 7 is 4.35 times less risky than Giant Manufacturing. It trades about 0.02 of its potential returns per unit of risk. Giant Manufacturing Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  14,050  in Giant Manufacturing Co on December 2, 2024 and sell it today you would earn a total of  1,750  from holding Giant Manufacturing Co or generate 12.46% return on investment over 90 days.

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

Capital Ice 7  vs.  Giant Manufacturing Co

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 8 (%) 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.

Giant Manufacturing

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Giant Manufacturing Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Giant Manufacturing may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Capital Ice and Giant Manufacturing

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

The idea behind Capital Ice 7 and Giant Manufacturing Co 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.