Correlation Between Cap ISR and Superior Plus

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

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

Diversification Opportunities for Cap ISR and Superior Plus

0.79

Correlation Coefficient

Cap ISR  Superior Plus

Poor diversification

The 3 months correlation between Cap and Superior is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cap ISR Actions and Superior Plus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Plus Corp and Cap ISR 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 Cap ISR Actions are associated (or correlated) with Superior Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Plus Corp has no effect on the direction of Cap ISR i.e., Cap ISR and Superior Plus go up and down completely randomly.

Pair Corralation between Cap ISR and Superior Plus

Assuming the 90 days trading horizon Cap ISR is expected to generate 1.06 times less return on investment than Superior Plus. But when comparing it to its historical volatility, Cap ISR Actions is 2.88 times less risky than Superior Plus. It trades about 0.18 of its potential returns per unit of risk. Superior Plus Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  398.00  in Superior Plus Corp on September 22, 2024 and sell it today you would earn a total of  10.00  from holding Superior Plus Corp or generate 2.51% return on investment over 90 days.

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

Cap ISR Actions  vs.  Superior Plus Corp

Cap ISR Actions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cap ISR Actions has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Cap ISR is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Cap ISR and Superior Plus

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

The idea behind Cap ISR Actions and Superior Plus Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.