Correlation Between Carabao Group and Premier Marketing
Can any of the company-specific risk be diversified away by investing in both Carabao Group and Premier Marketing 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 Carabao Group and Premier Marketing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carabao Group Public and Premier Marketing Public, you can compare the effects of market volatilities on Carabao Group and Premier Marketing 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 Carabao Group with a short position of Premier Marketing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carabao Group and Premier Marketing.
Diversification Opportunities for Carabao Group and Premier Marketing
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Carabao and Premier is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Carabao Group Public and Premier Marketing Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Marketing Public and Carabao Group 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 Carabao Group Public are associated (or correlated) with Premier Marketing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Marketing Public has no effect on the direction of Carabao Group i.e., Carabao Group and Premier Marketing go up and down completely randomly.
Pair Corralation between Carabao Group and Premier Marketing
Assuming the 90 days trading horizon Carabao Group Public is expected to under-perform the Premier Marketing. In addition to that, Carabao Group is 1.59 times more volatile than Premier Marketing Public. It trades about 0.0 of its total potential returns per unit of risk. Premier Marketing Public is currently generating about 0.02 per unit of volatility. If you would invest 836.00 in Premier Marketing Public on August 28, 2024 and sell it today you would earn a total of 99.00 from holding Premier Marketing Public or generate 11.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carabao Group Public vs. Premier Marketing Public
Performance |
| Timeline |
| Carabao Group Public |
| Premier Marketing Public |
Carabao Group and Premier Marketing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carabao Group and Premier Marketing
The main advantage of trading using opposite Carabao Group and Premier Marketing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carabao Group position performs unexpectedly, Premier Marketing 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 Premier Marketing will offset losses from the drop in Premier Marketing's long position.The idea behind Carabao Group Public and Premier Marketing Public 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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