Correlation Between San Juan and Capricorn Energy

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

By analyzing existing cross correlation between San Juan Basin and Capricorn Energy PLC, you can compare the effects of market volatilities on San Juan and Capricorn Energy 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 San Juan with a short position of Capricorn Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Juan and Capricorn Energy.

Diversification Opportunities for San Juan and Capricorn Energy

-0.46

Correlation Coefficient

San Juan  Capricorn Energy

Very good diversification

The 3 months correlation between San and Capricorn is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding San Juan Basin and Capricorn Energy PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricorn Energy PLC and San Juan 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 San Juan Basin are associated (or correlated) with Capricorn Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricorn Energy PLC has no effect on the direction of San Juan i.e., San Juan and Capricorn Energy go up and down completely randomly.

Pair Corralation between San Juan and Capricorn Energy

Considering the 90-day investment horizon San Juan Basin is expected to generate 0.68 times more return on investment than Capricorn Energy. However, San Juan Basin is 1.46 times less risky than Capricorn Energy. It trades about 0.18 of its potential returns per unit of risk. Capricorn Energy PLC is currently generating about -0.01 per unit of risk. If you would invest  386.00  in San Juan Basin on December 28, 2024 and sell it today you would earn a total of  177.00  from holding San Juan Basin or generate 45.85% return on investment over 90 days.

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

San Juan Basin  vs.  Capricorn Energy PLC

San Juan Basin

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in San Juan Basin are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking indicators, San Juan unveiled solid returns over the last few months and may actually be approaching a breakup point.

Capricorn Energy PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capricorn Energy PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Capricorn Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with San Juan and Capricorn Energy

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

The idea behind San Juan Basin and Capricorn Energy 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.