Correlation Between Caribbean Utilities and Capstone Mining

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

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

Diversification Opportunities for Caribbean Utilities and Capstone Mining

0.5

Correlation Coefficient

Caribbean Utilities  Capstone Mining

Very weak diversification

The 3 months correlation between Caribbean and Capstone is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities and Capstone Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Mining Corp and Caribbean Utilities 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 Caribbean Utilities are associated (or correlated) with Capstone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Mining Corp has no effect on the direction of Caribbean Utilities i.e., Caribbean Utilities and Capstone Mining go up and down completely randomly.

Pair Corralation between Caribbean Utilities and Capstone Mining

Assuming the 90 days trading horizon Caribbean Utilities is expected to under-perform the Capstone Mining. But the stock apears to be less risky and, when comparing its historical volatility, Caribbean Utilities is 3.27 times less risky than Capstone Mining. The stock trades about -0.07 of its potential returns per unit of risk. The Capstone Mining Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  895.00  in Capstone Mining Corp on December 25, 2024 and sell it today you would lose (29.00) from holding Capstone Mining Corp or give up 3.24% of portfolio value over 90 days.

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

Caribbean Utilities  vs.  Capstone Mining Corp

Caribbean Utilities

Risk-Adjusted Performance

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.

Capstone Mining Corp

Risk-Adjusted Performance

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 very healthy basic indicators, Capstone Mining is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Caribbean Utilities and Capstone Mining

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

The idea behind Caribbean Utilities and Capstone Mining 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.