Correlation Between CAPP and HYDRO

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

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

Diversification Opportunities for CAPP and HYDRO

0.0

Correlation Coefficient

CAPP  HYDRO

Pay attention - limited upside

The 3 months correlation between CAPP and HYDRO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CAPP and HYDRO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYDRO and CAPP 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 CAPP are associated (or correlated) with HYDRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYDRO has no effect on the direction of CAPP i.e., CAPP and HYDRO go up and down completely randomly.

Pair Corralation between CAPP and HYDRO

If you would invest  0.01  in CAPP on February 17, 2025 and sell it today you would earn a total of  0.00  from holding CAPP or generate 25.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CAPP  vs.  HYDRO

CAPP

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CAPP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, CAPP exhibited solid returns over the last few months and may actually be approaching a breakup point.

HYDRO

Risk-Adjusted Performance

Very Weak

Over the last 90 days HYDRO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, HYDRO is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CAPP and HYDRO

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

The idea behind CAPP and HYDRO 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.