Correlation Between Carmit and Afcon Holdings

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

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

Diversification Opportunities for Carmit and Afcon Holdings

0.53

Correlation Coefficient

Carmit  Afcon Holdings

Very weak diversification

The 3 months correlation between Carmit and Afcon is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Carmit and Afcon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afcon Holdings and Carmit 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 Carmit are associated (or correlated) with Afcon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afcon Holdings has no effect on the direction of Carmit i.e., Carmit and Afcon Holdings go up and down completely randomly.

Pair Corralation between Carmit and Afcon Holdings

Assuming the 90 days trading horizon Carmit is expected to generate 1.19 times less return on investment than Afcon Holdings. In addition to that, Carmit is 1.46 times more volatile than Afcon Holdings. It trades about 0.02 of its total potential returns per unit of risk. Afcon Holdings is currently generating about 0.03 per unit of volatility. If you would invest  1,476,000  in Afcon Holdings on September 24, 2024 and sell it today you would earn a total of  221,000  from holding Afcon Holdings or generate 14.97% return on investment over 90 days.

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

Carmit  vs.  Afcon Holdings

Carmit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Carmit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Afcon Holdings

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Afcon Holdings are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Afcon Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carmit and Afcon Holdings

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

The idea behind Carmit and Afcon Holdings 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.