Correlation Between Capital Drilling and AMG Advanced

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

By analyzing existing cross correlation between Capital Drilling and AMG Advanced Metallurgical, you can compare the effects of market volatilities on Capital Drilling and AMG Advanced 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 AMG Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Drilling and AMG Advanced.

Diversification Opportunities for Capital Drilling and AMG Advanced

0.44

Correlation Coefficient

Capital Drilling  AMG Advanced

Very weak diversification

The 3 months correlation between Capital and AMG is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling and AMG Advanced Metallurgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMG Advanced Metallu 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 AMG Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMG Advanced Metallu has no effect on the direction of Capital Drilling i.e., Capital Drilling and AMG Advanced go up and down completely randomly.

Pair Corralation between Capital Drilling and AMG Advanced

Assuming the 90 days trading horizon Capital Drilling is expected to generate 0.79 times more return on investment than AMG Advanced. However, Capital Drilling is 1.27 times less risky than AMG Advanced. It trades about -0.01 of its potential returns per unit of risk. AMG Advanced Metallurgical is currently generating about -0.05 per unit of risk. If you would invest  9,815  in Capital Drilling on October 11, 2024 and sell it today you would lose (1,515) from holding Capital Drilling or give up 15.44% of portfolio value over 90 days.

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

Capital Drilling  vs.  AMG Advanced Metallurgical

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.

AMG Advanced Metallu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMG Advanced Metallurgical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Capital Drilling and AMG Advanced

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

The idea behind Capital Drilling and AMG Advanced Metallurgical 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.