Correlation Between Capital Futures and Yem Chio

Can any of the company-specific risk be diversified away by investing in both Capital Futures and Yem Chio 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 Yem Chio 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 Yem Chio Co, you can compare the effects of market volatilities on Capital Futures and Yem Chio 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 Yem Chio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Futures and Yem Chio.

Diversification Opportunities for Capital Futures and Yem Chio

-0.54

Correlation Coefficient

Capital Futures  Yem Chio

Excellent diversification

The 3 months correlation between Capital and Yem is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Capital Futures Corp and Yem Chio Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yem Chio 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 Yem Chio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yem Chio has no effect on the direction of Capital Futures i.e., Capital Futures and Yem Chio go up and down completely randomly.

Pair Corralation between Capital Futures and Yem Chio

Assuming the 90 days trading horizon Capital Futures Corp is expected to generate 0.99 times more return on investment than Yem Chio. However, Capital Futures Corp is 1.01 times less risky than Yem Chio. It trades about 0.01 of its potential returns per unit of risk. Yem Chio Co is currently generating about -0.19 per unit of risk. If you would invest  5,650  in Capital Futures Corp on September 22, 2024 and sell it today you would earn a total of  10.00  from holding Capital Futures Corp or generate 0.18% return on investment over 90 days.

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

Capital Futures Corp  vs.  Yem Chio Co

Capital Futures Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Futures Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Yem Chio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yem Chio Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Capital Futures and Yem Chio

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

The idea behind Capital Futures Corp and Yem Chio 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.