Correlation Between Capital Power and Labrador Iron
Can any of the company-specific risk be diversified away by investing in both Capital Power and Labrador Iron 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 Labrador Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Power and Labrador Iron Ore, you can compare the effects of market volatilities on Capital Power and Labrador Iron 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 Labrador Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Power and Labrador Iron.
Diversification Opportunities for Capital Power and Labrador Iron
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Capital and Labrador is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Capital Power and Labrador Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador Iron Ore 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 Labrador Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Iron Ore has no effect on the direction of Capital Power i.e., Capital Power and Labrador Iron go up and down completely randomly.
Pair Corralation between Capital Power and Labrador Iron
Assuming the 90 days trading horizon Capital Power is expected to generate 0.88 times more return on investment than Labrador Iron. However, Capital Power is 1.13 times less risky than Labrador Iron. It trades about 0.06 of its potential returns per unit of risk. Labrador Iron Ore is currently generating about 0.01 per unit of risk. If you would invest 4,383 in Capital Power on August 30, 2024 and sell it today you would earn a total of 1,876 from holding Capital Power or generate 42.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Power vs. Labrador Iron Ore
Performance |
| Timeline |
| Capital Power |
| Labrador Iron Ore |
Capital Power and Labrador Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Power and Labrador Iron
The main advantage of trading using opposite Capital Power and Labrador Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Power position performs unexpectedly, Labrador Iron 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 Labrador Iron will offset losses from the drop in Labrador Iron's long position.| Capital Power vs. Canadian Utilities Limited | Capital Power vs. Emera Inc | Capital Power vs. Keyera Corp | Capital Power vs. Northland Power |
| Labrador Iron vs. Keyera Corp | Labrador Iron vs. Russel Metals | Labrador Iron vs. Freehold Royalties | Labrador Iron vs. Capital 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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