Correlation Between Capitol Health and Stelar Metals

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Can any of the company-specific risk be diversified away by investing in both Capitol Health and Stelar Metals 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 Capitol Health and Stelar Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capitol Health and Stelar Metals, you can compare the effects of market volatilities on Capitol Health and Stelar Metals 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 Capitol Health with a short position of Stelar Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitol Health and Stelar Metals.

Diversification Opportunities for Capitol Health and Stelar Metals

-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between Capitol and Stelar is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Capitol Health and Stelar Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stelar Metals and Capitol Health 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 Capitol Health are associated (or correlated) with Stelar Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stelar Metals has no effect on the direction of Capitol Health i.e., Capitol Health and Stelar Metals go up and down completely randomly.

Pair Corralation between Capitol Health and Stelar Metals

Assuming the 90 days trading horizon Capitol Health is expected to under-perform the Stelar Metals. In addition to that, Capitol Health is 1.09 times more volatile than Stelar Metals. It trades about -0.03 of its total potential returns per unit of risk. Stelar Metals is currently generating about -0.01 per unit of volatility. If you would invest  7.10  in Stelar Metals on September 12, 2024 and sell it today you would lose (0.10) from holding Stelar Metals or give up 1.41% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.65%
ValuesDaily Returns

Capitol Health  vs.  Stelar Metals

 Performance 
       Timeline  
Capitol Health 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Capitol Health are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking indicators, Capitol Health unveiled solid returns over the last few months and may actually be approaching a breakup point.
Stelar Metals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Stelar Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Stelar Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Capitol Health and Stelar Metals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Capitol Health and Stelar Metals

The main advantage of trading using opposite Capitol Health and Stelar Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitol Health position performs unexpectedly, Stelar Metals 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 Stelar Metals will offset losses from the drop in Stelar Metals' long position.
The idea behind Capitol Health and Stelar Metals 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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