Correlation Between Capital Drilling and Global Opportunities

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

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

Diversification Opportunities for Capital Drilling and Global Opportunities

-0.06

Correlation Coefficient

Capital Drilling  Global Opportunities

Good diversification

The 3 months correlation between Capital and Global is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling and Global Opportunities Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Opportunities 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 Global Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Opportunities has no effect on the direction of Capital Drilling i.e., Capital Drilling and Global Opportunities go up and down completely randomly.

Pair Corralation between Capital Drilling and Global Opportunities

Assuming the 90 days trading horizon Capital Drilling is expected to under-perform the Global Opportunities. In addition to that, Capital Drilling is 1.57 times more volatile than Global Opportunities Trust. It trades about -0.01 of its total potential returns per unit of risk. Global Opportunities Trust is currently generating about -0.01 per unit of volatility. If you would invest  31,690  in Global Opportunities Trust on October 4, 2024 and sell it today you would lose (3,090) from holding Global Opportunities Trust or give up 9.75% of portfolio value over 90 days.

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

Capital Drilling  vs.  Global Opportunities Trust

Capital Drilling

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Drilling are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Capital Drilling is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Global Opportunities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Capital Drilling and Global Opportunities

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

The idea behind Capital Drilling and Global Opportunities 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.