Correlation Between Spring Ventures and Capital Point

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

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

Diversification Opportunities for Spring Ventures and Capital Point

0.72

Correlation Coefficient

Spring Ventures  Capital Point

Poor diversification

The 3 months correlation between Spring and Capital is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Spring Ventures and Capital Point in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Point and Spring Ventures 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 Spring Ventures are associated (or correlated) with Capital Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Point has no effect on the direction of Spring Ventures i.e., Spring Ventures and Capital Point go up and down completely randomly.

Pair Corralation between Spring Ventures and Capital Point

Assuming the 90 days trading horizon Spring Ventures is expected to under-perform the Capital Point. In addition to that, Spring Ventures is 2.45 times more volatile than Capital Point. It trades about -0.12 of its total potential returns per unit of risk. Capital Point is currently generating about 0.01 per unit of volatility. If you would invest  4,990  in Capital Point on September 3, 2024 and sell it today you would earn a total of  10.00  from holding Capital Point or generate 0.2% return on investment over 90 days.

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

Spring Ventures  vs.  Capital Point

Spring Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spring Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Capital Point

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Point has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Capital Point is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spring Ventures and Capital Point

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

The idea behind Spring Ventures and Capital Point 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.