Correlation Between Morien Resources and Capital Power

Can any of the company-specific risk be diversified away by investing in both Morien 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 Morien 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 Morien Resources Corp and Capital Power, you can compare the effects of market volatilities on Morien 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 Morien Resources with a short position of Capital Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morien Resources and Capital Power.

Diversification Opportunities for Morien Resources and Capital Power

-0.67

Correlation Coefficient

Morien Resources  Capital Power

Excellent diversification

The 3 months correlation between Morien and Capital is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Morien Resources Corp and Capital Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Power and Morien 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 Morien Resources Corp 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 Morien Resources i.e., Morien Resources and Capital Power go up and down completely randomly.

Pair Corralation between Morien Resources and Capital Power

Assuming the 90 days horizon Morien Resources Corp is expected to under-perform the Capital Power. In addition to that, Morien Resources is 3.3 times more volatile than Capital Power. It trades about -0.02 of its total potential returns per unit of risk. Capital Power is currently generating about 0.25 per unit of volatility. If you would invest  4,093  in Capital Power on September 28, 2024 and sell it today you would earn a total of  2,309  from holding Capital Power or generate 56.41% return on investment over 90 days.

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

Morien Resources Corp  vs.  Capital Power

Morien Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morien Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Capital Power

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Power are ranked lower than 16 (%) 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 Morien Resources and Capital Power

The main advantage of trading using opposite Morien Resources and Capital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morien 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 Morien Resources Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.