Correlation Between Alkali Metals and Capacite Infraprojects

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

By analyzing existing cross correlation between Alkali Metals Limited and Capacite Infraprojects Limited, you can compare the effects of market volatilities on Alkali Metals and Capacite Infraprojects 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 Alkali Metals with a short position of Capacite Infraprojects. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alkali Metals and Capacite Infraprojects.

Diversification Opportunities for Alkali Metals and Capacite Infraprojects

0.11

Correlation Coefficient

Alkali Metals  Capacite Infraprojects

Average diversification

The 3 months correlation between Alkali and Capacite is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Alkali Metals Limited and Capacite Infraprojects Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capacite Infraprojects and Alkali Metals 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 Alkali Metals Limited are associated (or correlated) with Capacite Infraprojects. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capacite Infraprojects has no effect on the direction of Alkali Metals i.e., Alkali Metals and Capacite Infraprojects go up and down completely randomly.

Pair Corralation between Alkali Metals and Capacite Infraprojects

Assuming the 90 days trading horizon Alkali Metals is expected to generate 7.78 times less return on investment than Capacite Infraprojects. But when comparing it to its historical volatility, Alkali Metals Limited is 1.01 times less risky than Capacite Infraprojects. It trades about 0.01 of its potential returns per unit of risk. Capacite Infraprojects Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  14,810  in Capacite Infraprojects Limited on October 8, 2024 and sell it today you would earn a total of  26,250  from holding Capacite Infraprojects Limited or generate 177.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.35%
Values	Daily Returns

Alkali Metals Limited  vs.  Capacite Infraprojects Limited

Alkali Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alkali Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alkali Metals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Capacite Infraprojects

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capacite Infraprojects Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Capacite Infraprojects may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alkali Metals and Capacite Infraprojects

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

The idea behind Alkali Metals Limited and Capacite Infraprojects Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.