Correlation Between Cartrade Tech and Associated Alcohols

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

By analyzing existing cross correlation between Cartrade Tech Limited and Associated Alcohols Breweries, you can compare the effects of market volatilities on Cartrade Tech and Associated Alcohols 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 Cartrade Tech with a short position of Associated Alcohols. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cartrade Tech and Associated Alcohols.

Diversification Opportunities for Cartrade Tech and Associated Alcohols

0.65

Correlation Coefficient

Cartrade Tech  Associated Alcohols

Poor diversification

The 3 months correlation between Cartrade and Associated is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cartrade Tech Limited and Associated Alcohols Breweries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Alcohols and Cartrade Tech 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 Cartrade Tech Limited are associated (or correlated) with Associated Alcohols. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Alcohols has no effect on the direction of Cartrade Tech i.e., Cartrade Tech and Associated Alcohols go up and down completely randomly.

Pair Corralation between Cartrade Tech and Associated Alcohols

Assuming the 90 days trading horizon Cartrade Tech Limited is expected to generate 1.16 times more return on investment than Associated Alcohols. However, Cartrade Tech is 1.16 times more volatile than Associated Alcohols Breweries. It trades about 0.25 of its potential returns per unit of risk. Associated Alcohols Breweries is currently generating about 0.09 per unit of risk. If you would invest  99,515  in Cartrade Tech Limited on September 20, 2024 and sell it today you would earn a total of  54,270  from holding Cartrade Tech Limited or generate 54.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Cartrade Tech Limited  vs.  Associated Alcohols Breweries

Cartrade Tech Limited

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cartrade Tech Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Cartrade Tech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Associated Alcohols

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cartrade Tech and Associated Alcohols

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

The idea behind Cartrade Tech Limited and Associated Alcohols Breweries 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.