Correlation Between CP ALL and PTG Energy

Can any of the company-specific risk be diversified away by investing in both CP ALL and PTG 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 CP ALL and PTG Energy 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 PTG Energy PCL, you can compare the effects of market volatilities on CP ALL and PTG 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 CP ALL with a short position of PTG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CP ALL and PTG Energy.

Diversification Opportunities for CP ALL and PTG Energy

0.77

Correlation Coefficient

CP ALL  PTG Energy

Poor diversification

The 3 months correlation between CPALL and PTG is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and PTG Energy PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTG Energy PCL 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 PTG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTG Energy PCL has no effect on the direction of CP ALL i.e., CP ALL and PTG Energy go up and down completely randomly.

Pair Corralation between CP ALL and PTG Energy

Assuming the 90 days trading horizon CP ALL Public is expected to generate 0.71 times more return on investment than PTG Energy. However, CP ALL Public is 1.4 times less risky than PTG Energy. It trades about -0.03 of its potential returns per unit of risk. PTG Energy PCL is currently generating about -0.05 per unit of risk. If you would invest  6,751  in CP ALL Public on September 24, 2024 and sell it today you would lose (1,401) from holding CP ALL Public or give up 20.75% of portfolio value over 90 days.

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

CP ALL Public  vs.  PTG Energy PCL

CP ALL Public

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

PTG Energy PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PTG Energy PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with CP ALL and PTG Energy

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

The idea behind CP ALL Public and PTG Energy PCL 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.