Correlation Between Capstone Infrastructure and Innergex Renewable
Can any of the company-specific risk be diversified away by investing in both Capstone Infrastructure and Innergex Renewable 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 Capstone Infrastructure and Innergex Renewable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capstone Infrastructure Corp and Innergex Renewable Energy, you can compare the effects of market volatilities on Capstone Infrastructure and Innergex Renewable 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 Capstone Infrastructure with a short position of Innergex Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capstone Infrastructure and Innergex Renewable.
Diversification Opportunities for Capstone Infrastructure and Innergex Renewable
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capstone and Innergex is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Infrastructure Corp and Innergex Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innergex Renewable Energy and Capstone Infrastructure 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 Capstone Infrastructure Corp are associated (or correlated) with Innergex Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innergex Renewable Energy has no effect on the direction of Capstone Infrastructure i.e., Capstone Infrastructure and Innergex Renewable go up and down completely randomly.
Pair Corralation between Capstone Infrastructure and Innergex Renewable
Assuming the 90 days trading horizon Capstone Infrastructure Corp is expected to generate 0.82 times more return on investment than Innergex Renewable. However, Capstone Infrastructure Corp is 1.22 times less risky than Innergex Renewable. It trades about 0.29 of its potential returns per unit of risk. Innergex Renewable Energy is currently generating about 0.13 per unit of risk. If you would invest 1,459 in Capstone Infrastructure Corp on October 25, 2024 and sell it today you would earn a total of 60.00 from holding Capstone Infrastructure Corp or generate 4.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Capstone Infrastructure Corp vs. Innergex Renewable Energy
Performance |
| Timeline |
| Capstone Infrastructure |
| Innergex Renewable Energy |
Capstone Infrastructure and Innergex Renewable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capstone Infrastructure and Innergex Renewable
The main advantage of trading using opposite Capstone Infrastructure and Innergex Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capstone Infrastructure position performs unexpectedly, Innergex Renewable 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 Innergex Renewable will offset losses from the drop in Innergex Renewable's long position.The idea behind Capstone Infrastructure Corp and Innergex Renewable Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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