Correlation Between Impax Asset and Capital Metals

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

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

Diversification Opportunities for Impax Asset and Capital Metals

0.3

Correlation Coefficient

Impax Asset  Capital Metals

Weak diversification

The 3 months correlation between Impax and Capital is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Impax Asset Management and Capital Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Metals PLC and Impax Asset 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 Impax Asset Management are associated (or correlated) with Capital Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Metals PLC has no effect on the direction of Impax Asset i.e., Impax Asset and Capital Metals go up and down completely randomly.

Pair Corralation between Impax Asset and Capital Metals

Assuming the 90 days trading horizon Impax Asset Management is expected to under-perform the Capital Metals. But the stock apears to be less risky and, when comparing its historical volatility, Impax Asset Management is 1.66 times less risky than Capital Metals. The stock trades about -0.06 of its potential returns per unit of risk. The Capital Metals PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  180.00  in Capital Metals PLC on December 23, 2024 and sell it today you would earn a total of  35.00  from holding Capital Metals PLC or generate 19.44% return on investment over 90 days.

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

Impax Asset Management  vs.  Capital Metals PLC

Impax Asset Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Impax Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Capital Metals PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Metals PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Capital Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Impax Asset and Capital Metals

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

The idea behind Impax Asset Management and Capital Metals PLC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.