Correlation Between Capital Power and Caldwell Partners

Can any of the company-specific risk be diversified away by investing in both Capital Power and Caldwell Partners 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 Capital Power and Caldwell Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capital Power and Caldwell Partners International, you can compare the effects of market volatilities on Capital Power and Caldwell Partners 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 Capital Power with a short position of Caldwell Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Power and Caldwell Partners.

Diversification Opportunities for Capital Power and Caldwell Partners

0.21

Correlation Coefficient

Capital Power  Caldwell Partners

Modest diversification

The 3 months correlation between Capital and Caldwell is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Capital Power and Caldwell Partners Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caldwell Partners and Capital Power 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 Capital Power are associated (or correlated) with Caldwell Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caldwell Partners has no effect on the direction of Capital Power i.e., Capital Power and Caldwell Partners go up and down completely randomly.

Pair Corralation between Capital Power and Caldwell Partners

Assuming the 90 days trading horizon Capital Power is expected to generate 0.6 times more return on investment than Caldwell Partners. However, Capital Power is 1.65 times less risky than Caldwell Partners. It trades about 0.21 of its potential returns per unit of risk. Caldwell Partners International is currently generating about 0.06 per unit of risk. If you would invest  4,917  in Capital Power on September 28, 2024 and sell it today you would earn a total of  1,485  from holding Capital Power or generate 30.2% return on investment over 90 days.

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

Capital Power  vs.  Caldwell Partners Internationa

Capital Power

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Power are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Capital Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Caldwell Partners

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caldwell Partners International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Caldwell Partners displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital Power and Caldwell Partners

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

The idea behind Capital Power and Caldwell Partners International 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.