Correlation Between Capital Drilling and Bellevue Healthcare

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

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

Diversification Opportunities for Capital Drilling and Bellevue Healthcare

0.14

Correlation Coefficient

Capital Drilling  Bellevue Healthcare

Average diversification

The 3 months correlation between Capital and Bellevue is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling and Bellevue Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellevue Healthcare Trust 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 Bellevue Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellevue Healthcare Trust has no effect on the direction of Capital Drilling i.e., Capital Drilling and Bellevue Healthcare go up and down completely randomly.

Pair Corralation between Capital Drilling and Bellevue Healthcare

Assuming the 90 days trading horizon Capital Drilling is expected to under-perform the Bellevue Healthcare. In addition to that, Capital Drilling is 1.79 times more volatile than Bellevue Healthcare Trust. It trades about -0.12 of its total potential returns per unit of risk. Bellevue Healthcare Trust is currently generating about 0.28 per unit of volatility. If you would invest  13,920  in Bellevue Healthcare Trust on October 15, 2024 and sell it today you would earn a total of  840.00  from holding Bellevue Healthcare Trust or generate 6.03% return on investment over 90 days.

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

Capital Drilling  vs.  Bellevue Healthcare Trust

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.

Bellevue Healthcare Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bellevue Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Bellevue Healthcare is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Capital Drilling and Bellevue Healthcare

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

The idea behind Capital Drilling and Bellevue Healthcare Trust 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.