Correlation Between Castro and Golf

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

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

Diversification Opportunities for Castro and Golf

0.94

Correlation Coefficient

Castro  Golf

Almost no diversification

The 3 months correlation between Castro and Golf is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Castro and Golf Co Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golf Co Group and Castro 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 Castro are associated (or correlated) with Golf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golf Co Group has no effect on the direction of Castro i.e., Castro and Golf go up and down completely randomly.

Pair Corralation between Castro and Golf

Assuming the 90 days trading horizon Castro is expected to generate 1.31 times less return on investment than Golf. In addition to that, Castro is 1.05 times more volatile than Golf Co Group. It trades about 0.24 of its total potential returns per unit of risk. Golf Co Group is currently generating about 0.33 per unit of volatility. If you would invest  48,370  in Golf Co Group on September 13, 2024 and sell it today you would earn a total of  17,730  from holding Golf Co Group or generate 36.65% return on investment over 90 days.

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

Castro  vs.  Golf Co Group

Castro

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Castro are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Castro sustained solid returns over the last few months and may actually be approaching a breakup point.

Golf Co Group

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Golf Co Group are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Golf sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Castro and Golf

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

The idea behind Castro and Golf Co Group 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.