Correlation Between Caribbean Utilities and Signature Resources

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

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

Diversification Opportunities for Caribbean Utilities and Signature Resources

0.08

Correlation Coefficient

Caribbean Utilities  Signature Resources

Significant diversification

The 3 months correlation between Caribbean and Signature is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities and Signature Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signature Resources 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 Signature Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signature Resources has no effect on the direction of Caribbean Utilities i.e., Caribbean Utilities and Signature Resources go up and down completely randomly.

Pair Corralation between Caribbean Utilities and Signature Resources

Assuming the 90 days trading horizon Caribbean Utilities is expected to generate 0.11 times more return on investment than Signature Resources. However, Caribbean Utilities is 8.93 times less risky than Signature Resources. It trades about 0.01 of its potential returns per unit of risk. Signature Resources is currently generating about -0.07 per unit of risk. If you would invest  1,394  in Caribbean Utilities on September 26, 2024 and sell it today you would earn a total of  6.00  from holding Caribbean Utilities or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Caribbean Utilities  vs.  Signature Resources

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.

Signature Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Signature Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Caribbean Utilities and Signature Resources

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

The idea behind Caribbean Utilities and Signature Resources 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.