Correlation Between DelphX Capital and Capital Power

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

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

Diversification Opportunities for DelphX Capital and Capital Power

-0.42

Correlation Coefficient

DelphX Capital  Capital Power

Very good diversification

The 3 months correlation between DelphX and Capital is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding DelphX Capital Markets and Capital Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Power and DelphX Capital 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 DelphX Capital Markets are associated (or correlated) with Capital Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Power has no effect on the direction of DelphX Capital i.e., DelphX Capital and Capital Power go up and down completely randomly.

Pair Corralation between DelphX Capital and Capital Power

Assuming the 90 days trading horizon DelphX Capital Markets is expected to under-perform the Capital Power. In addition to that, DelphX Capital is 4.8 times more volatile than Capital Power. It trades about -0.03 of its total potential returns per unit of risk. Capital Power is currently generating about -0.05 per unit of volatility. If you would invest  6,296  in Capital Power on October 10, 2024 and sell it today you would lose (91.00) from holding Capital Power or give up 1.45% of portfolio value over 90 days.

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

DelphX Capital Markets  vs.  Capital Power

DelphX Capital Markets

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DelphX Capital Markets are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, DelphX Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Capital Power

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Power are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Capital Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DelphX Capital and Capital Power

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

The idea behind DelphX Capital Markets and Capital Power 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.