Correlation Between Capital Metals and Grieg Seafood

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

By analyzing existing cross correlation between Capital Metals PLC and Grieg Seafood, you can compare the effects of market volatilities on Capital Metals and Grieg Seafood 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 Metals with a short position of Grieg Seafood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Metals and Grieg Seafood.

Diversification Opportunities for Capital Metals and Grieg Seafood

0.27

Correlation Coefficient

Capital Metals  Grieg Seafood

Modest diversification

The 3 months correlation between Capital and Grieg is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Capital Metals PLC and Grieg Seafood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grieg Seafood and Capital Metals 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 Metals PLC are associated (or correlated) with Grieg Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grieg Seafood has no effect on the direction of Capital Metals i.e., Capital Metals and Grieg Seafood go up and down completely randomly.

Pair Corralation between Capital Metals and Grieg Seafood

Assuming the 90 days trading horizon Capital Metals PLC is expected to generate 2.61 times more return on investment than Grieg Seafood. However, Capital Metals is 2.61 times more volatile than Grieg Seafood. It trades about 0.06 of its potential returns per unit of risk. Grieg Seafood is currently generating about 0.14 per unit of risk. If you would invest  165.00  in Capital Metals PLC on September 4, 2024 and sell it today you would earn a total of  20.00  from holding Capital Metals PLC or generate 12.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Capital Metals PLC  vs.  Grieg Seafood

Capital Metals PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Metals PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Capital Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Grieg Seafood

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Capital Metals and Grieg Seafood

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

The idea behind Capital Metals PLC and Grieg Seafood 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..