Correlation Between Capital Power and Gibson Energy

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

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

Diversification Opportunities for Capital Power and Gibson Energy

0.77

Correlation Coefficient

Capital Power  Gibson Energy

Poor diversification

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

Pair Corralation between Capital Power and Gibson Energy

Assuming the 90 days trading horizon Capital Power is expected to under-perform the Gibson Energy. In addition to that, Capital Power is 1.81 times more volatile than Gibson Energy. It trades about -0.13 of its total potential returns per unit of risk. Gibson Energy is currently generating about -0.07 per unit of volatility. If you would invest  2,443  in Gibson Energy on December 30, 2024 and sell it today you would lose (174.00) from holding Gibson Energy or give up 7.12% of portfolio value over 90 days.

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

Capital Power  vs.  Gibson Energy

Capital Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Gibson Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gibson Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Capital Power and Gibson Energy

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

The idea behind Capital Power and Gibson Energy 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.