Correlation Between Canaf Investments and Rackla Metals

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

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

Diversification Opportunities for Canaf Investments and Rackla Metals

-0.54

Correlation Coefficient

Canaf Investments  Rackla Metals

Excellent diversification

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

Pair Corralation between Canaf Investments and Rackla Metals

Assuming the 90 days horizon Canaf Investments is expected to generate 0.49 times more return on investment than Rackla Metals. However, Canaf Investments is 2.05 times less risky than Rackla Metals. It trades about 0.09 of its potential returns per unit of risk. Rackla Metals is currently generating about -0.01 per unit of risk. If you would invest  30.00  in Canaf Investments on October 25, 2024 and sell it today you would earn a total of  5.00  from holding Canaf Investments or generate 16.67% return on investment over 90 days.

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

Canaf Investments  vs.  Rackla Metals

Canaf Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canaf Investments are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Canaf Investments showed solid returns over the last few months and may actually be approaching a breakup point.

Rackla Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rackla Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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 Canaf Investments and Rackla Metals

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

The idea behind Canaf Investments and Rackla Metals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.