Correlation Between Snap and Carlyle
Can any of the company-specific risk be diversified away by investing in both Snap and Carlyle 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 Snap and Carlyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Carlyle Group, you can compare the effects of market volatilities on Snap and Carlyle 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 Snap with a short position of Carlyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Carlyle.
Diversification Opportunities for Snap and Carlyle
Poor diversification
The 3 months correlation between Snap and Carlyle is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Carlyle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Group and Snap 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 Snap Inc are associated (or correlated) with Carlyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlyle Group has no effect on the direction of Snap i.e., Snap and Carlyle go up and down completely randomly.
Pair Corralation between Snap and Carlyle
Given the investment horizon of 90 days Snap is expected to generate 1.3 times less return on investment than Carlyle. In addition to that, Snap is 1.64 times more volatile than Carlyle Group. It trades about 0.03 of its total potential returns per unit of risk. Carlyle Group is currently generating about 0.07 per unit of volatility. If you would invest 2,609 in Carlyle Group on August 27, 2024 and sell it today you would earn a total of 2,376 from holding Carlyle Group or generate 91.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.22% |
| Values | Daily Returns |
Snap Inc vs. Carlyle Group
Performance |
| Timeline |
| Snap Inc |
| Carlyle Group |
Snap and Carlyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Carlyle
The main advantage of trading using opposite Snap and Carlyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Carlyle 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 Carlyle will offset losses from the drop in Carlyle's long position.The idea behind Snap Inc and Carlyle Group 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.| Carlyle vs. BJs Restaurants | Carlyle vs. ALBIS LEASING AG | Carlyle vs. Darden Restaurants | Carlyle vs. VIRGIN WINES UK |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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