Correlation Between CP ALL and Southern California

Can any of the company-specific risk be diversified away by investing in both CP ALL and Southern California 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 CP ALL and Southern California into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CP ALL Public and Southern California Gas, you can compare the effects of market volatilities on CP ALL and Southern California 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 CP ALL with a short position of Southern California. Check out your portfolio center. Please also check ongoing floating volatility patterns of CP ALL and Southern California.

Diversification Opportunities for CP ALL and Southern California

0.66

Correlation Coefficient

CP ALL  Southern California

Poor diversification

The 3 months correlation between CVPBF and Southern is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and Southern California Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California Gas and CP ALL 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 CP ALL Public are associated (or correlated) with Southern California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern California Gas has no effect on the direction of CP ALL i.e., CP ALL and Southern California go up and down completely randomly.

Pair Corralation between CP ALL and Southern California

If you would invest  0.00  in Southern California Gas on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Southern California Gas or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.61%
Values	Daily Returns

CP ALL Public  vs.  Southern California Gas

CP ALL Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CP ALL Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Southern California Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern California Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Southern California is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CP ALL and Southern California

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

The idea behind CP ALL Public and Southern California Gas 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.