Correlation Between Capital Drilling and Caledonia Investments
Can any of the company-specific risk be diversified away by investing in both Capital Drilling and Caledonia Investments 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 Capital Drilling and Caledonia Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Drilling and Caledonia Investments, you can compare the effects of market volatilities on Capital Drilling and Caledonia Investments 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 Capital Drilling with a short position of Caledonia Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Drilling and Caledonia Investments.
Diversification Opportunities for Capital Drilling and Caledonia Investments
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Capital and Caledonia is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling and Caledonia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Investments and Capital Drilling 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 Capital Drilling are associated (or correlated) with Caledonia Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Investments has no effect on the direction of Capital Drilling i.e., Capital Drilling and Caledonia Investments go up and down completely randomly.
Pair Corralation between Capital Drilling and Caledonia Investments
Assuming the 90 days trading horizon Capital Drilling is expected to under-perform the Caledonia Investments. In addition to that, Capital Drilling is 1.58 times more volatile than Caledonia Investments. It trades about -0.01 of its total potential returns per unit of risk. Caledonia Investments is currently generating about 0.01 per unit of volatility. If you would invest 349,327 in Caledonia Investments on October 14, 2024 and sell it today you would lose (327.00) from holding Caledonia Investments or give up 0.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Drilling vs. Caledonia Investments
Performance |
| Timeline |
| Capital Drilling |
| Caledonia Investments |
Capital Drilling and Caledonia Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Drilling and Caledonia Investments
The main advantage of trading using opposite Capital Drilling and Caledonia Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Drilling position performs unexpectedly, Caledonia Investments 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 Caledonia Investments will offset losses from the drop in Caledonia Investments' long position.| Capital Drilling vs. Associated British Foods | Capital Drilling vs. Software Circle plc | Capital Drilling vs. Sealed Air Corp | Capital Drilling vs. Delta Air Lines |
| Caledonia Investments vs. Capital Drilling | Caledonia Investments vs. Gamma Communications PLC | Caledonia Investments vs. Zegona Communications Plc | Caledonia Investments vs. Darden Restaurants |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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