Correlation Between Carmit and Bram Indus

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

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

Diversification Opportunities for Carmit and Bram Indus

0.29

Correlation Coefficient

Carmit  Bram Indus

Modest diversification

The 3 months correlation between Carmit and Bram is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Carmit and Bram Indus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bram Indus 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 Bram Indus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bram Indus has no effect on the direction of Carmit i.e., Carmit and Bram Indus go up and down completely randomly.

Pair Corralation between Carmit and Bram Indus

Assuming the 90 days trading horizon Carmit is expected to generate 31.39 times less return on investment than Bram Indus. But when comparing it to its historical volatility, Carmit is 1.64 times less risky than Bram Indus. It trades about 0.01 of its potential returns per unit of risk. Bram Indus is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  15,400  in Bram Indus on September 24, 2024 and sell it today you would earn a total of  2,780  from holding Bram Indus or generate 18.05% return on investment over 90 days.

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

Carmit  vs.  Bram Indus

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.

Bram Indus

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bram Indus are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bram Indus sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carmit and Bram Indus

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

The idea behind Carmit and Bram Indus 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.