Correlation Between Carmit and Ashtrom

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

By analyzing existing cross correlation between Carmit and Ashtrom Group, you can compare the effects of market volatilities on Carmit and Ashtrom 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 Ashtrom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carmit and Ashtrom.

Diversification Opportunities for Carmit and Ashtrom

0.64

Correlation Coefficient

Carmit  Ashtrom

Poor diversification

The 3 months correlation between Carmit and Ashtrom is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Carmit and Ashtrom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtrom Group 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 Ashtrom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtrom Group has no effect on the direction of Carmit i.e., Carmit and Ashtrom go up and down completely randomly.

Pair Corralation between Carmit and Ashtrom

Assuming the 90 days trading horizon Carmit is expected to generate 49.16 times less return on investment than Ashtrom. In addition to that, Carmit is 1.13 times more volatile than Ashtrom Group. It trades about 0.01 of its total potential returns per unit of risk. Ashtrom Group is currently generating about 0.33 per unit of volatility. If you would invest  479,300  in Ashtrom Group on September 24, 2024 and sell it today you would earn a total of  164,700  from holding Ashtrom Group or generate 34.36% return on investment over 90 days.

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

Carmit  vs.  Ashtrom Group

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.

Ashtrom Group

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Ashtrom Group are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ashtrom sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carmit and Ashtrom

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

The idea behind Carmit and Ashtrom Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.