Correlation Between Thomson Reuters and Capstone Mining

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

By analyzing existing cross correlation between Thomson Reuters Corp and Capstone Mining Corp, you can compare the effects of market volatilities on Thomson Reuters and Capstone Mining 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 Thomson Reuters with a short position of Capstone Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thomson Reuters and Capstone Mining.

Diversification Opportunities for Thomson Reuters and Capstone Mining

-0.39

Correlation Coefficient

Thomson Reuters  Capstone Mining

Very good diversification

The 3 months correlation between Thomson and Capstone is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Thomson Reuters Corp and Capstone Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Mining Corp and Thomson Reuters 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 Thomson Reuters Corp are associated (or correlated) with Capstone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Mining Corp has no effect on the direction of Thomson Reuters i.e., Thomson Reuters and Capstone Mining go up and down completely randomly.

Pair Corralation between Thomson Reuters and Capstone Mining

Assuming the 90 days trading horizon Thomson Reuters Corp is expected to generate 0.45 times more return on investment than Capstone Mining. However, Thomson Reuters Corp is 2.24 times less risky than Capstone Mining. It trades about 0.09 of its potential returns per unit of risk. Capstone Mining Corp is currently generating about -0.05 per unit of risk. If you would invest  23,570  in Thomson Reuters Corp on September 13, 2024 and sell it today you would earn a total of  480.00  from holding Thomson Reuters Corp or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Thomson Reuters Corp  vs.  Capstone Mining Corp

Thomson Reuters Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thomson Reuters Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Thomson Reuters is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Capstone Mining Corp

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capstone Mining Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Capstone Mining is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Thomson Reuters and Capstone Mining

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

The idea behind Thomson Reuters Corp and Capstone Mining Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.