Correlation Between Stellar and Karat Packaging
Can any of the company-specific risk be diversified away by investing in both Stellar and Karat Packaging 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 Stellar and Karat Packaging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stellar and Karat Packaging, you can compare the effects of market volatilities on Stellar and Karat Packaging 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 Stellar with a short position of Karat Packaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and Karat Packaging.
Diversification Opportunities for Stellar and Karat Packaging
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stellar and Karat is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Karat Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karat Packaging and Stellar 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 Stellar are associated (or correlated) with Karat Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karat Packaging has no effect on the direction of Stellar i.e., Stellar and Karat Packaging go up and down completely randomly.
Pair Corralation between Stellar and Karat Packaging
Assuming the 90 days trading horizon Stellar is expected to generate 3.3 times more return on investment than Karat Packaging. However, Stellar is 3.3 times more volatile than Karat Packaging. It trades about 0.14 of its potential returns per unit of risk. Karat Packaging is currently generating about 0.06 per unit of risk. If you would invest 11.00 in Stellar on October 20, 2024 and sell it today you would earn a total of 38.00 from holding Stellar or generate 345.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 69.35% |
| Values | Daily Returns |
Stellar vs. Karat Packaging
Performance |
| Timeline |
| Stellar |
| Karat Packaging |
Stellar and Karat Packaging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stellar and Karat Packaging
The main advantage of trading using opposite Stellar and Karat Packaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar position performs unexpectedly, Karat Packaging 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 Karat Packaging will offset losses from the drop in Karat Packaging's long position.The idea behind Stellar and Karat Packaging 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.| Karat Packaging vs. Greif Bros | Karat Packaging vs. Reynolds Consumer Products | Karat Packaging vs. Silgan Holdings | Karat Packaging vs. O I Glass |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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