Correlation Between Capital Securities and Capital Futures

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

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

Diversification Opportunities for Capital Securities and Capital Futures

0.68

Correlation Coefficient

Capital Securities  Capital Futures

Poor diversification

The 3 months correlation between Capital and Capital is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Capital Securities Corp and Capital Futures Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Futures Corp and Capital Securities 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 Securities Corp are associated (or correlated) with Capital Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Futures Corp has no effect on the direction of Capital Securities i.e., Capital Securities and Capital Futures go up and down completely randomly.

Pair Corralation between Capital Securities and Capital Futures

Assuming the 90 days trading horizon Capital Securities Corp is expected to generate 1.24 times more return on investment than Capital Futures. However, Capital Securities is 1.24 times more volatile than Capital Futures Corp. It trades about 0.19 of its potential returns per unit of risk. Capital Futures Corp is currently generating about 0.06 per unit of risk. If you would invest  2,055  in Capital Securities Corp on September 18, 2024 and sell it today you would earn a total of  305.00  from holding Capital Securities Corp or generate 14.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Capital Securities Corp  vs.  Capital Futures Corp

Capital Securities Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Securities Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Capital Securities showed solid returns over the last few months and may actually be approaching a breakup point.

Capital Futures Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Futures Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Capital Futures is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Capital Securities and Capital Futures

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

The idea behind Capital Securities Corp and Capital Futures 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.