Correlation Between Castle Peak and Boutique Newcity

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

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

Diversification Opportunities for Castle Peak and Boutique Newcity

0.82

Correlation Coefficient

Castle Peak  Boutique Newcity

Very poor diversification

The 3 months correlation between Castle and Boutique is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Castle Peak Holdings and Boutique Newcity Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boutique Newcity Public and Castle Peak 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 Castle Peak Holdings are associated (or correlated) with Boutique Newcity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boutique Newcity Public has no effect on the direction of Castle Peak i.e., Castle Peak and Boutique Newcity go up and down completely randomly.

Pair Corralation between Castle Peak and Boutique Newcity

Assuming the 90 days trading horizon Castle Peak Holdings is expected to under-perform the Boutique Newcity. In addition to that, Castle Peak is 1.29 times more volatile than Boutique Newcity Public. It trades about -0.25 of its total potential returns per unit of risk. Boutique Newcity Public is currently generating about -0.1 per unit of volatility. If you would invest  1,950  in Boutique Newcity Public on September 4, 2024 and sell it today you would lose (320.00) from holding Boutique Newcity Public or give up 16.41% of portfolio value over 90 days.

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

Castle Peak Holdings  vs.  Boutique Newcity Public

Castle Peak Holdings

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's technical 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.

Boutique Newcity Public

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Boutique Newcity 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 forward-looking signals 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 Castle Peak and Boutique Newcity

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

The idea behind Castle Peak Holdings and Boutique Newcity 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.