Correlation Between Cabot and Alto Ingredients
Can any of the company-specific risk be diversified away by investing in both Cabot and Alto Ingredients 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 Cabot and Alto Ingredients into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cabot and Alto Ingredients, you can compare the effects of market volatilities on Cabot and Alto Ingredients 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 Cabot with a short position of Alto Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot and Alto Ingredients.
Diversification Opportunities for Cabot and Alto Ingredients
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cabot and Alto is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Alto Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alto Ingredients and Cabot 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 Cabot are associated (or correlated) with Alto Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alto Ingredients has no effect on the direction of Cabot i.e., Cabot and Alto Ingredients go up and down completely randomly.
Pair Corralation between Cabot and Alto Ingredients
Considering the 90-day investment horizon Cabot is expected to generate 0.37 times more return on investment than Alto Ingredients. However, Cabot is 2.73 times less risky than Alto Ingredients. It trades about 0.03 of its potential returns per unit of risk. Alto Ingredients is currently generating about 0.01 per unit of risk. If you would invest 7,122 in Cabot on November 1, 2024 and sell it today you would earn a total of 1,627 from holding Cabot or generate 22.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cabot vs. Alto Ingredients
Performance |
| Timeline |
| Cabot |
| Alto Ingredients |
Cabot and Alto Ingredients Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cabot and Alto Ingredients
The main advantage of trading using opposite Cabot and Alto Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot position performs unexpectedly, Alto Ingredients 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 Alto Ingredients will offset losses from the drop in Alto Ingredients' long position.The idea behind Cabot and Alto Ingredients 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.| Alto Ingredients vs. Oil Dri | Alto Ingredients vs. FutureFuel Corp | Alto Ingredients vs. Quaker Chemical | Alto Ingredients vs. Koppers Holdings |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |