Correlation Between Carlyle and Income Opportunity

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

By analyzing existing cross correlation between Carlyle Group and Income Opportunity Realty, you can compare the effects of market volatilities on Carlyle and Income Opportunity 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 Carlyle with a short position of Income Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlyle and Income Opportunity.

Diversification Opportunities for Carlyle and Income Opportunity

0.28

Correlation Coefficient

Carlyle  Income Opportunity

Modest diversification

The 3 months correlation between Carlyle and Income is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Income Opportunity Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Opportunity Realty and Carlyle 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 Carlyle Group are associated (or correlated) with Income Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Opportunity Realty has no effect on the direction of Carlyle i.e., Carlyle and Income Opportunity go up and down completely randomly.

Pair Corralation between Carlyle and Income Opportunity

Allowing for the 90-day total investment horizon Carlyle Group is expected to generate 0.86 times more return on investment than Income Opportunity. However, Carlyle Group is 1.16 times less risky than Income Opportunity. It trades about 0.12 of its potential returns per unit of risk. Income Opportunity Realty is currently generating about 0.06 per unit of risk. If you would invest  4,282  in Carlyle Group on September 22, 2024 and sell it today you would earn a total of  740.00  from holding Carlyle Group or generate 17.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	64.06%
Values	Daily Returns

Carlyle Group  vs.  Income Opportunity Realty

Carlyle Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

Income Opportunity Realty

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Income Opportunity Realty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Income Opportunity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Carlyle and Income Opportunity

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

The idea behind Carlyle Group and Income Opportunity Realty 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.