Correlation Between CPL Group and Castle Peak

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

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

Diversification Opportunities for CPL Group and Castle Peak

0.91

Correlation Coefficient

CPL Group  Castle Peak

Almost no diversification

The 3 months correlation between CPL and Castle is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding CPL Group 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 CPL Group 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 CPL Group 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 CPL Group i.e., CPL Group and Castle Peak go up and down completely randomly.

Pair Corralation between CPL Group and Castle Peak

Assuming the 90 days trading horizon CPL Group Public is expected to generate 1.0 times more return on investment than Castle Peak. However, CPL Group Public is 1.0 times less risky than Castle Peak. It trades about 0.11 of its potential returns per unit of risk. Castle Peak Holdings is currently generating about 0.11 per unit of risk. If you would invest  127.00  in CPL Group Public on September 1, 2024 and sell it today you would earn a total of  1.00  from holding CPL Group Public or generate 0.79% return on investment over 90 days.

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

CPL Group Public  vs.  Castle Peak Holdings

CPL Group Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CPL Group Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, CPL Group disclosed solid returns over the last few months and may actually be approaching a breakup point.

Castle Peak Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Castle Peak Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical indicators, Castle Peak disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CPL Group and Castle Peak

The main advantage of trading using opposite CPL Group and Castle Peak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CPL Group 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 CPL Group 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.