Correlation Between Carlson Investments and Tower Investments

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

By analyzing existing cross correlation between Carlson Investments SA and Tower Investments SA, you can compare the effects of market volatilities on Carlson Investments and Tower Investments 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 Carlson Investments with a short position of Tower Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlson Investments and Tower Investments.

Diversification Opportunities for Carlson Investments and Tower Investments

0.45

Correlation Coefficient

Carlson Investments  Tower Investments

Very weak diversification

The 3 months correlation between Carlson and Tower is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Carlson Investments SA and Tower Investments SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Investments and Carlson Investments 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 Carlson Investments SA are associated (or correlated) with Tower Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Investments has no effect on the direction of Carlson Investments i.e., Carlson Investments and Tower Investments go up and down completely randomly.

Pair Corralation between Carlson Investments and Tower Investments

Assuming the 90 days trading horizon Carlson Investments SA is expected to under-perform the Tower Investments. But the stock apears to be less risky and, when comparing its historical volatility, Carlson Investments SA is 1.55 times less risky than Tower Investments. The stock trades about -0.1 of its potential returns per unit of risk. The Tower Investments SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  324.00  in Tower Investments SA on September 13, 2024 and sell it today you would earn a total of  46.00  from holding Tower Investments SA or generate 14.2% return on investment over 90 days.

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

Carlson Investments SA  vs.  Tower Investments SA

Carlson Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlson Investments SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Tower Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Investments SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Tower Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlson Investments and Tower Investments

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

The idea behind Carlson Investments SA and Tower Investments SA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.