Correlation Between CP ALL and Castle Peak

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

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

Diversification Opportunities for CP ALL and Castle Peak

0.08

Correlation Coefficient

CP ALL  Castle Peak

Significant diversification

The 3 months correlation between CPALL and Castle is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and Castle Peak Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castle Peak Holdings and CP ALL 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 CP ALL Public are associated (or correlated) with Castle Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castle Peak Holdings has no effect on the direction of CP ALL i.e., CP ALL and Castle Peak go up and down completely randomly.

Pair Corralation between CP ALL and Castle Peak

Assuming the 90 days trading horizon CP ALL Public is expected to under-perform the Castle Peak. In addition to that, CP ALL is 1.16 times more volatile than Castle Peak Holdings. It trades about -0.06 of its total potential returns per unit of risk. Castle Peak Holdings is currently generating about -0.02 per unit of volatility. If you would invest  806.00  in Castle Peak Holdings on December 30, 2024 and sell it today you would lose (36.00) from holding Castle Peak Holdings or give up 4.47% of portfolio value over 90 days.

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

CP ALL Public  vs.  Castle Peak Holdings

CP ALL Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days CP ALL Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Castle Peak Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Castle Peak Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Castle Peak is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CP ALL and Castle Peak

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

The idea behind CP ALL Public and Castle Peak Holdings 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.