Correlation Between Capstone Mining and Caribbean Utilities

Can any of the company-specific risk be diversified away by investing in both Capstone Mining and Caribbean Utilities 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 Capstone Mining and Caribbean Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capstone Mining Corp and Caribbean Utilities, you can compare the effects of market volatilities on Capstone Mining and Caribbean Utilities 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 Capstone Mining with a short position of Caribbean Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capstone Mining and Caribbean Utilities.

Diversification Opportunities for Capstone Mining and Caribbean Utilities

-0.38

Correlation Coefficient

Capstone Mining  Caribbean Utilities

Very good diversification

The 3 months correlation between Capstone and Caribbean is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Mining Corp and Caribbean Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribbean Utilities and Capstone Mining 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 Capstone Mining Corp are associated (or correlated) with Caribbean Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribbean Utilities has no effect on the direction of Capstone Mining i.e., Capstone Mining and Caribbean Utilities go up and down completely randomly.

Pair Corralation between Capstone Mining and Caribbean Utilities

Assuming the 90 days horizon Capstone Mining Corp is expected to under-perform the Caribbean Utilities. In addition to that, Capstone Mining is 2.43 times more volatile than Caribbean Utilities. It trades about -0.05 of its total potential returns per unit of risk. Caribbean Utilities is currently generating about -0.01 per unit of volatility. If you would invest  1,400  in Caribbean Utilities on October 23, 2024 and sell it today you would lose (10.00) from holding Caribbean Utilities or give up 0.71% of portfolio value over 90 days.

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

Capstone Mining Corp  vs.  Caribbean Utilities

Capstone Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Caribbean Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caribbean Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caribbean Utilities is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Capstone Mining and Caribbean Utilities

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

The idea behind Capstone Mining Corp and Caribbean Utilities 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.