Correlation Between Capital Drilling and MT Bank

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

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

Diversification Opportunities for Capital Drilling and MT Bank

0.17

Correlation Coefficient

Capital Drilling  MT Bank

Average diversification

The 3 months correlation between Capital and 0JW2 is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling and MT Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank Corp and Capital Drilling 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 Drilling are associated (or correlated) with MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank Corp has no effect on the direction of Capital Drilling i.e., Capital Drilling and MT Bank go up and down completely randomly.

Pair Corralation between Capital Drilling and MT Bank

Assuming the 90 days trading horizon Capital Drilling is expected to under-perform the MT Bank. But the stock apears to be less risky and, when comparing its historical volatility, Capital Drilling is 1.07 times less risky than MT Bank. The stock trades about -0.01 of its potential returns per unit of risk. The MT Bank Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  17,230  in MT Bank Corp on September 2, 2024 and sell it today you would earn a total of  4,769  from holding MT Bank Corp or generate 27.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.97%
Values	Daily Returns

Capital Drilling  vs.  MT Bank Corp

Capital Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capital Drilling is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

MT Bank Corp

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Capital Drilling and MT Bank

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

The idea behind Capital Drilling and MT Bank 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.