Correlation Between CAPP and GRIN

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

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

Diversification Opportunities for CAPP and GRIN

0.61

Correlation Coefficient

CAPP  GRIN

Poor diversification

The 3 months correlation between CAPP and GRIN is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CAPP and GRIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRIN 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 GRIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRIN has no effect on the direction of CAPP i.e., CAPP and GRIN go up and down completely randomly.

Pair Corralation between CAPP and GRIN

Assuming the 90 days trading horizon CAPP is expected to generate 0.59 times more return on investment than GRIN. However, CAPP is 1.69 times less risky than GRIN. It trades about -0.01 of its potential returns per unit of risk. GRIN is currently generating about -0.11 per unit of risk. If you would invest  0.01  in CAPP on January 30, 2024 and sell it today you would lose  0.00  from holding CAPP or give up 1.52% of portfolio value over 90 days.

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

CAPP  vs.  GRIN

CAPP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAPP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady basic indicators, CAPP may actually be approaching a critical reversion point that can send shares even higher in May 2024.

GRIN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GRIN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for GRIN shareholders.

Pair Trading with CAPP and GRIN

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

The idea behind CAPP and GRIN 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.