Correlation Between Capstone Infrastructure and Maxim Power

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

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

Diversification Opportunities for Capstone Infrastructure and Maxim Power

0.29

Correlation Coefficient

Capstone Infrastructure  Maxim Power

Modest diversification

The 3 months correlation between Capstone and Maxim is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Infrastructure Corp and Maxim Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxim Power Corp and Capstone Infrastructure 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 Infrastructure Corp are associated (or correlated) with Maxim Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxim Power Corp has no effect on the direction of Capstone Infrastructure i.e., Capstone Infrastructure and Maxim Power go up and down completely randomly.

Pair Corralation between Capstone Infrastructure and Maxim Power

Assuming the 90 days trading horizon Capstone Infrastructure Corp is expected to generate 0.31 times more return on investment than Maxim Power. However, Capstone Infrastructure Corp is 3.27 times less risky than Maxim Power. It trades about 0.12 of its potential returns per unit of risk. Maxim Power Corp is currently generating about 0.02 per unit of risk. If you would invest  1,449  in Capstone Infrastructure Corp on December 1, 2024 and sell it today you would earn a total of  81.00  from holding Capstone Infrastructure Corp or generate 5.59% return on investment over 90 days.

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

Capstone Infrastructure Corp  vs.  Maxim Power Corp

Capstone Infrastructure

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capstone Infrastructure Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Capstone Infrastructure is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Maxim Power Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Maxim Power Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Maxim Power is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Capstone Infrastructure and Maxim Power

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

The idea behind Capstone Infrastructure Corp and Maxim Power Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..