Correlation Between Greenfire Resources and Capital Power

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

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

Diversification Opportunities for Greenfire Resources and Capital Power

-0.32

Correlation Coefficient

Greenfire Resources  Capital Power

Very good diversification

The 3 months correlation between Greenfire and Capital is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Greenfire Resources and Capital Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Power and Greenfire Resources 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 Greenfire Resources 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 Greenfire Resources i.e., Greenfire Resources and Capital Power go up and down completely randomly.

Pair Corralation between Greenfire Resources and Capital Power

Assuming the 90 days trading horizon Greenfire Resources is expected to generate 1.45 times more return on investment than Capital Power. However, Greenfire Resources is 1.45 times more volatile than Capital Power. It trades about 0.11 of its potential returns per unit of risk. Capital Power is currently generating about 0.11 per unit of risk. If you would invest  986.00  in Greenfire Resources on October 5, 2024 and sell it today you would earn a total of  68.00  from holding Greenfire Resources or generate 6.9% return on investment over 90 days.

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

Greenfire Resources  vs.  Capital Power

Greenfire Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Capital Power

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Power are ranked lower than 15 (%) 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 Greenfire Resources and Capital Power

The main advantage of trading using opposite Greenfire Resources and Capital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Greenfire Resources 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 Greenfire Resources 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.