Correlation Between Caledonia Investments and Capricorn Energy
Can any of the company-specific risk be diversified away by investing in both Caledonia Investments and Capricorn Energy 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 Caledonia Investments and Capricorn Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Investments and Capricorn Energy PLC, you can compare the effects of market volatilities on Caledonia Investments and Capricorn Energy 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 Caledonia Investments with a short position of Capricorn Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Investments and Capricorn Energy.
Diversification Opportunities for Caledonia Investments and Capricorn Energy
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caledonia and Capricorn is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments and Capricorn Energy PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricorn Energy PLC and Caledonia Investments 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 Caledonia Investments are associated (or correlated) with Capricorn Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricorn Energy PLC has no effect on the direction of Caledonia Investments i.e., Caledonia Investments and Capricorn Energy go up and down completely randomly.
Pair Corralation between Caledonia Investments and Capricorn Energy
Assuming the 90 days trading horizon Caledonia Investments is expected to generate 4.29 times less return on investment than Capricorn Energy. But when comparing it to its historical volatility, Caledonia Investments is 2.45 times less risky than Capricorn Energy. It trades about 0.22 of its potential returns per unit of risk. Capricorn Energy PLC is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 27,950 in Capricorn Energy PLC on October 21, 2024 and sell it today you would earn a total of 5,050 from holding Capricorn Energy PLC or generate 18.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caledonia Investments vs. Capricorn Energy PLC
Performance |
| Timeline |
| Caledonia Investments |
| Capricorn Energy PLC |
Caledonia Investments and Capricorn Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Investments and Capricorn Energy
The main advantage of trading using opposite Caledonia Investments and Capricorn Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Investments position performs unexpectedly, Capricorn Energy 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 Capricorn Energy will offset losses from the drop in Capricorn Energy's long position.| Caledonia Investments vs. Bioventix | Caledonia Investments vs. VeriSign | Caledonia Investments vs. Games Workshop Group | Caledonia Investments vs. AJ Bell plc |
| Capricorn Energy vs. Zoom Video Communications | Capricorn Energy vs. Enbridge | Capricorn Energy vs. Endo International PLC | Capricorn Energy vs. Somero Enterprise |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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