Correlation Between Fortis and Capital Power
Can any of the company-specific risk be diversified away by investing in both Fortis 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 Fortis and Capital Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortis Inc and Capital Power, you can compare the effects of market volatilities on Fortis 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 Fortis with a short position of Capital Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortis and Capital Power.
Diversification Opportunities for Fortis and Capital Power
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fortis and Capital is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Fortis Inc and Capital Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Power and Fortis 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 Fortis Inc 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 Fortis i.e., Fortis and Capital Power go up and down completely randomly.
Pair Corralation between Fortis and Capital Power
Assuming the 90 days trading horizon Fortis Inc is expected to generate 0.32 times more return on investment than Capital Power. However, Fortis Inc is 3.11 times less risky than Capital Power. It trades about 0.07 of its potential returns per unit of risk. Capital Power is currently generating about -0.07 per unit of risk. If you would invest 6,170 in Fortis Inc on December 3, 2024 and sell it today you would earn a total of 230.00 from holding Fortis Inc or generate 3.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Fortis Inc vs. Capital Power
Performance |
Timeline |
Fortis Inc |
Capital Power |
Fortis and Capital Power Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fortis and Capital Power
The main advantage of trading using opposite Fortis and Capital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortis 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 Fortis Inc 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.Capital Power vs. Canadian Utilities Limited | Capital Power vs. Emera Inc | Capital Power vs. Keyera Corp | Capital Power vs. Northland Power |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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