Correlation Between TeraGo and Capital Power

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

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

Diversification Opportunities for TeraGo and Capital Power

-0.92

Correlation Coefficient

TeraGo  Capital Power

Pay attention - limited upside

The 3 months correlation between TeraGo and Capital is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding TeraGo Inc and Capital Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Power and TeraGo 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 TeraGo Inc 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 TeraGo i.e., TeraGo and Capital Power go up and down completely randomly.

Pair Corralation between TeraGo and Capital Power

Assuming the 90 days trading horizon TeraGo Inc is expected to under-perform the Capital Power. In addition to that, TeraGo is 1.86 times more volatile than Capital Power. It trades about -0.28 of its total potential returns per unit of risk. Capital Power is currently generating about 0.33 per unit of volatility. If you would invest  4,409  in Capital Power on September 3, 2024 and sell it today you would earn a total of  1,819  from holding Capital Power or generate 41.26% return on investment over 90 days.

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

TeraGo Inc  vs.  Capital Power

TeraGo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TeraGo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Capital Power

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Power are ranked lower than 25 (%) 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 TeraGo and Capital Power

The main advantage of trading using opposite TeraGo and Capital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TeraGo 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 TeraGo Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.