Correlation Between Capital Power and Fortis
Can any of the company-specific risk be diversified away by investing in both Capital Power and Fortis 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 Power and Fortis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Power and Fortis Inc, you can compare the effects of market volatilities on Capital Power and Fortis 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 Power with a short position of Fortis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Power and Fortis.
Diversification Opportunities for Capital Power and Fortis
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Fortis is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Capital Power and Fortis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Inc and Capital Power 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 Power are associated (or correlated) with Fortis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Inc has no effect on the direction of Capital Power i.e., Capital Power and Fortis go up and down completely randomly.
Pair Corralation between Capital Power and Fortis
Assuming the 90 days trading horizon Capital Power is expected to generate 2.03 times more return on investment than Fortis. However, Capital Power is 2.03 times more volatile than Fortis Inc. It trades about 0.31 of its potential returns per unit of risk. Fortis Inc is currently generating about 0.14 per unit of risk. If you would invest 4,398 in Capital Power on August 28, 2024 and sell it today you would earn a total of 1,702 from holding Capital Power or generate 38.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Power vs. Fortis Inc
Performance |
| Timeline |
| Capital Power |
| Fortis Inc |
Capital Power and Fortis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Power and Fortis
The main advantage of trading using opposite Capital Power and Fortis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Power position performs unexpectedly, Fortis 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 Fortis will offset losses from the drop in Fortis' long position.| Capital Power vs. Canadian Utilities Limited | Capital Power vs. Emera Inc | Capital Power vs. Keyera Corp | Capital Power vs. Northland Power |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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