Correlation Between Caspian Services and Sabine Royalty

Can any of the company-specific risk be diversified away by investing in both Caspian Services and Sabine Royalty 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 Caspian Services and Sabine Royalty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caspian Services and Sabine Royalty Trust, you can compare the effects of market volatilities on Caspian Services and Sabine Royalty 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 Caspian Services with a short position of Sabine Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caspian Services and Sabine Royalty.

Diversification Opportunities for Caspian Services and Sabine Royalty

0.26

Correlation Coefficient

Caspian Services  Sabine Royalty

Modest diversification

The 3 months correlation between Caspian and Sabine is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Caspian Services and Sabine Royalty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabine Royalty Trust and Caspian Services 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 Caspian Services are associated (or correlated) with Sabine Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabine Royalty Trust has no effect on the direction of Caspian Services i.e., Caspian Services and Sabine Royalty go up and down completely randomly.

Pair Corralation between Caspian Services and Sabine Royalty

Given the investment horizon of 90 days Caspian Services is expected to generate 32.59 times more return on investment than Sabine Royalty. However, Caspian Services is 32.59 times more volatile than Sabine Royalty Trust. It trades about 0.06 of its potential returns per unit of risk. Sabine Royalty Trust is currently generating about 0.03 per unit of risk. If you would invest  0.01  in Caspian Services on October 22, 2024 and sell it today you would earn a total of  0.39  from holding Caspian Services or generate 3900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.24%
Values	Daily Returns

Caspian Services  vs.  Sabine Royalty Trust

Caspian Services

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caspian Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Caspian Services showed solid returns over the last few months and may actually be approaching a breakup point.

Sabine Royalty Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sabine Royalty Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Sabine Royalty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caspian Services and Sabine Royalty

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

The idea behind Caspian Services and Sabine Royalty Trust 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.