Correlation Between Capital Futures and President Securities

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

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

Diversification Opportunities for Capital Futures and President Securities

0.64

Correlation Coefficient

Capital Futures  President Securities

Poor diversification

The 3 months correlation between Capital and President is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Capital Futures Corp and President Securities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Securities Corp and Capital Futures 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 Futures Corp are associated (or correlated) with President Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Securities Corp has no effect on the direction of Capital Futures i.e., Capital Futures and President Securities go up and down completely randomly.

Pair Corralation between Capital Futures and President Securities

Assuming the 90 days trading horizon Capital Futures Corp is expected to generate 0.98 times more return on investment than President Securities. However, Capital Futures Corp is 1.02 times less risky than President Securities. It trades about -0.06 of its potential returns per unit of risk. President Securities Corp is currently generating about -0.13 per unit of risk. If you would invest  5,840  in Capital Futures Corp on September 18, 2024 and sell it today you would lose (80.00) from holding Capital Futures Corp or give up 1.37% of portfolio value over 90 days.

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

Capital Futures Corp  vs.  President Securities Corp

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.

President Securities Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in President Securities Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, President Securities 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 Futures and President Securities

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

The idea behind Capital Futures Corp and President Securities 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.