Correlation Between Caribbean Utilities and Millbank Mining

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

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

Diversification Opportunities for Caribbean Utilities and Millbank Mining

-0.35

Correlation Coefficient

Caribbean Utilities  Millbank Mining

Very good diversification

The 3 months correlation between Caribbean and Millbank is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities and Millbank Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millbank Mining 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 Millbank Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millbank Mining Corp has no effect on the direction of Caribbean Utilities i.e., Caribbean Utilities and Millbank Mining go up and down completely randomly.

Pair Corralation between Caribbean Utilities and Millbank Mining

Assuming the 90 days trading horizon Caribbean Utilities is expected to generate 34.17 times less return on investment than Millbank Mining. But when comparing it to its historical volatility, Caribbean Utilities is 4.66 times less risky than Millbank Mining. It trades about 0.01 of its potential returns per unit of risk. Millbank Mining Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Millbank Mining Corp on September 23, 2024 and sell it today you would earn a total of  6.00  from holding Millbank Mining Corp or generate 13.95% return on investment over 90 days.

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

Caribbean Utilities  vs.  Millbank Mining Corp

Caribbean Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caribbean Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caribbean Utilities is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Millbank Mining Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Millbank Mining Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Millbank Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caribbean Utilities and Millbank Mining

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

The idea behind Caribbean Utilities and Millbank Mining 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.