Correlation Between Central Asia and Capital Metals
Can any of the company-specific risk be diversified away by investing in both Central Asia and Capital 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 Central Asia and Capital Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Asia Metals and Capital Metals PLC, you can compare the effects of market volatilities on Central Asia and Capital 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 Central Asia with a short position of Capital Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Asia and Capital Metals.
Diversification Opportunities for Central Asia and Capital Metals
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Central and Capital is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Capital Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Metals PLC and Central Asia 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 Central Asia Metals are associated (or correlated) with Capital Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Metals PLC has no effect on the direction of Central Asia i.e., Central Asia and Capital Metals go up and down completely randomly.
Pair Corralation between Central Asia and Capital Metals
Assuming the 90 days trading horizon Central Asia is expected to generate 27.63 times less return on investment than Capital Metals. But when comparing it to its historical volatility, Central Asia Metals is 5.31 times less risky than Capital Metals. It trades about 0.01 of its potential returns per unit of risk. Capital Metals PLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 119.00 in Capital Metals PLC on September 12, 2024 and sell it today you would earn a total of 71.00 from holding Capital Metals PLC or generate 59.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Asia Metals vs. Capital Metals PLC
Performance |
| Timeline |
| Central Asia Metals |
| Capital Metals PLC |
Central Asia and Capital Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Asia and Capital Metals
The main advantage of trading using opposite Central Asia and Capital Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Asia position performs unexpectedly, Capital 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 Capital Metals will offset losses from the drop in Capital Metals' long position.| Central Asia vs. Givaudan SA | Central Asia vs. Antofagasta PLC | Central Asia vs. Ferrexpo PLC | Central Asia vs. Atalaya Mining |
| Capital Metals vs. Givaudan SA | Capital Metals vs. Antofagasta PLC | Capital Metals vs. Ferrexpo PLC | Capital Metals vs. Atalaya Mining |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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