Correlation Between Carters and Fenbo Holdings

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

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

Diversification Opportunities for Carters and Fenbo Holdings

0.84

Correlation Coefficient

Carters  Fenbo Holdings

Very poor diversification

The 3 months correlation between Carters and Fenbo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Fenbo Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fenbo Holdings and Carters 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 Carters are associated (or correlated) with Fenbo Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fenbo Holdings has no effect on the direction of Carters i.e., Carters and Fenbo Holdings go up and down completely randomly.

Pair Corralation between Carters and Fenbo Holdings

Considering the 90-day investment horizon Carters is expected to generate 0.19 times more return on investment than Fenbo Holdings. However, Carters is 5.31 times less risky than Fenbo Holdings. It trades about -0.06 of its potential returns per unit of risk. Fenbo Holdings Limited is currently generating about -0.06 per unit of risk. If you would invest  6,756  in Carters on August 30, 2024 and sell it today you would lose (1,255) from holding Carters or give up 18.58% of portfolio value over 90 days.

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

Carters  vs.  Fenbo Holdings Limited

Carters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Fenbo Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fenbo Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Carters and Fenbo Holdings

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

The idea behind Carters and Fenbo Holdings Limited 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.