Correlation Between Caribbean Utilities and Aboitiz Power

Can any of the company-specific risk be diversified away by investing in both Caribbean Utilities and Aboitiz Power 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 Caribbean Utilities and Aboitiz Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caribbean Utilities and Aboitiz Power Corp, you can compare the effects of market volatilities on Caribbean Utilities and Aboitiz Power 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 Caribbean Utilities with a short position of Aboitiz Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caribbean Utilities and Aboitiz Power.

Diversification Opportunities for Caribbean Utilities and Aboitiz Power

0.46

Correlation Coefficient

Caribbean Utilities  Aboitiz Power

Very weak diversification

The 3 months correlation between Caribbean and Aboitiz is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities and Aboitiz Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aboitiz Power Corp and Caribbean Utilities 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 Caribbean Utilities are associated (or correlated) with Aboitiz Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aboitiz Power Corp has no effect on the direction of Caribbean Utilities i.e., Caribbean Utilities and Aboitiz Power go up and down completely randomly.

Pair Corralation between Caribbean Utilities and Aboitiz Power

Assuming the 90 days horizon Caribbean Utilities is expected to generate 1.23 times more return on investment than Aboitiz Power. However, Caribbean Utilities is 1.23 times more volatile than Aboitiz Power Corp. It trades about 0.08 of its potential returns per unit of risk. Aboitiz Power Corp is currently generating about -0.21 per unit of risk. If you would invest  1,342  in Caribbean Utilities on February 3, 2024 and sell it today you would earn a total of  38.00  from holding Caribbean Utilities or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Caribbean Utilities  vs.  Aboitiz Power Corp

Caribbean Utilities

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caribbean Utilities are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Caribbean Utilities reported solid returns over the last few months and may actually be approaching a breakup point.

Aboitiz Power Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aboitiz Power Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Aboitiz Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caribbean Utilities and Aboitiz Power

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

The idea behind Caribbean Utilities and Aboitiz Power Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.