Correlation Between CK Power and Demco Public

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

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

Diversification Opportunities for CK Power and Demco Public

0.14

Correlation Coefficient

CK Power  Demco Public

Average diversification

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

Pair Corralation between CK Power and Demco Public

Assuming the 90 days trading horizon CK Power Public is expected to under-perform the Demco Public. But the stock apears to be less risky and, when comparing its historical volatility, CK Power Public is 72.88 times less risky than Demco Public. The stock trades about -0.1 of its potential returns per unit of risk. The Demco Public is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  356.00  in Demco Public on August 31, 2024 and sell it today you would lose (10.00) from holding Demco Public or give up 2.81% of portfolio value over 90 days.

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

CK Power Public  vs.  Demco Public

CK Power Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CK Power Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Demco Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Demco Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Demco Public sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CK Power and Demco Public

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

The idea behind CK Power Public and Demco Public 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.