Correlation Between Coastal Capital and Xtra Energy

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

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

Diversification Opportunities for Coastal Capital and Xtra Energy

0.46

Correlation Coefficient

Coastal Capital  Xtra Energy

Very weak diversification

The 3 months correlation between Coastal and Xtra is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Coastal Capital Acq and Xtra Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtra Energy Corp and Coastal Capital 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 Coastal Capital Acq are associated (or correlated) with Xtra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtra Energy Corp has no effect on the direction of Coastal Capital i.e., Coastal Capital and Xtra Energy go up and down completely randomly.

Pair Corralation between Coastal Capital and Xtra Energy

Given the investment horizon of 90 days Coastal Capital Acq is expected to generate 4.78 times more return on investment than Xtra Energy. However, Coastal Capital is 4.78 times more volatile than Xtra Energy Corp. It trades about 0.24 of its potential returns per unit of risk. Xtra Energy Corp is currently generating about 0.26 per unit of risk. If you would invest  0.05  in Coastal Capital Acq on September 18, 2024 and sell it today you would earn a total of  0.06  from holding Coastal Capital Acq or generate 120.0% return on investment over 90 days.

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

Coastal Capital Acq  vs.  Xtra Energy Corp

Coastal Capital Acq

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coastal Capital Acq are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Coastal Capital revealed solid returns over the last few months and may actually be approaching a breakup point.

Xtra Energy Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtra Energy Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Xtra Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coastal Capital and Xtra Energy

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

The idea behind Coastal Capital Acq and Xtra Energy 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 Anywhere module to track or share privately all of your investments from the convenience of any device.