Correlation Between Capricorn Energy and San Leon

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

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

Diversification Opportunities for Capricorn Energy and San Leon

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Correlation Coefficient

Capricorn Energy  San Leon

Pay attention - limited upside

The 3 months correlation between Capricorn and San is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Capricorn Energy PLC and San Leon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Leon Energy and Capricorn Energy 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 Capricorn Energy PLC are associated (or correlated) with San Leon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Leon Energy has no effect on the direction of Capricorn Energy i.e., Capricorn Energy and San Leon go up and down completely randomly.

Pair Corralation between Capricorn Energy and San Leon

Assuming the 90 days horizon Capricorn Energy PLC is expected to generate 4.06 times more return on investment than San Leon. However, Capricorn Energy is 4.06 times more volatile than San Leon Energy. It trades about 0.04 of its potential returns per unit of risk. San Leon Energy is currently generating about -0.02 per unit of risk. If you would invest  612.00  in Capricorn Energy PLC on September 3, 2024 and sell it today you would lose (42.00) from holding Capricorn Energy PLC or give up 6.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	91.13%
Values	Daily Returns

Capricorn Energy PLC  vs.  San Leon Energy

Capricorn Energy PLC

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Capricorn Energy PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Capricorn Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

San Leon Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days San Leon Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, San Leon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Capricorn Energy and San Leon

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

The idea behind Capricorn Energy PLC and San Leon 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.