Correlation Between Castle Peak and City Sports

Can any of the company-specific risk be diversified away by investing in both Castle Peak and City Sports 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 City Sports 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 City Sports and, you can compare the effects of market volatilities on Castle Peak and City Sports 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 City Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Castle Peak and City Sports.

Diversification Opportunities for Castle Peak and City Sports

-0.82

Correlation Coefficient

Castle Peak  City Sports

Pay attention - limited upside

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

Pair Corralation between Castle Peak and City Sports

Assuming the 90 days trading horizon Castle Peak is expected to generate 1.18 times less return on investment than City Sports. But when comparing it to its historical volatility, Castle Peak Holdings is 1.0 times less risky than City Sports. It trades about 0.05 of its potential returns per unit of risk. City Sports and is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,831  in City Sports and on October 6, 2024 and sell it today you would earn a total of  2,144  from holding City Sports and or generate 31.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.67%
Values	Daily Returns

Castle Peak Holdings  vs.  City Sports and

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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

City Sports

Risk-Adjusted Performance

42 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in City Sports and are ranked lower than 42 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, City Sports may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Castle Peak and City Sports

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

The idea behind Castle Peak Holdings and City Sports and 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.