Correlation Between CP ALL and Electricity Generating

Can any of the company-specific risk be diversified away by investing in both CP ALL and Electricity Generating 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 CP ALL and Electricity Generating into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CP ALL Public and Electricity Generating Public, you can compare the effects of market volatilities on CP ALL and Electricity Generating 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 CP ALL with a short position of Electricity Generating. Check out your portfolio center. Please also check ongoing floating volatility patterns of CP ALL and Electricity Generating.

Diversification Opportunities for CP ALL and Electricity Generating

0.89

Correlation Coefficient

CP ALL  Electricity Generating

Very poor diversification

The 3 months correlation between CPALL and Electricity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and Electricity Generating Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electricity Generating and CP ALL 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 CP ALL Public are associated (or correlated) with Electricity Generating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electricity Generating has no effect on the direction of CP ALL i.e., CP ALL and Electricity Generating go up and down completely randomly.

Pair Corralation between CP ALL and Electricity Generating

Assuming the 90 days trading horizon CP ALL Public is expected to generate 0.91 times more return on investment than Electricity Generating. However, CP ALL Public is 1.1 times less risky than Electricity Generating. It trades about 0.01 of its potential returns per unit of risk. Electricity Generating Public is currently generating about -0.03 per unit of risk. If you would invest  6,387  in CP ALL Public on June 23, 2024 and sell it today you would earn a total of  113.00  from holding CP ALL Public or generate 1.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

CP ALL Public  vs.  Electricity Generating Public

CP ALL Public

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CP ALL Public are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, CP ALL sustained solid returns over the last few months and may actually be approaching a breakup point.

Electricity Generating

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electricity Generating Public are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Electricity Generating disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CP ALL and Electricity Generating

The main advantage of trading using opposite CP ALL and Electricity Generating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CP ALL position performs unexpectedly, Electricity Generating 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 Electricity Generating will offset losses from the drop in Electricity Generating's long position.

The idea behind CP ALL Public and Electricity Generating Public 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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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.