Correlation Between Carmit and Rotshtein

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

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

Diversification Opportunities for Carmit and Rotshtein

0.55

Correlation Coefficient

Carmit  Rotshtein

Very weak diversification

The 3 months correlation between Carmit and Rotshtein is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Carmit and Rotshtein in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rotshtein 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 Rotshtein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rotshtein has no effect on the direction of Carmit i.e., Carmit and Rotshtein go up and down completely randomly.

Pair Corralation between Carmit and Rotshtein

Assuming the 90 days trading horizon Carmit is expected to under-perform the Rotshtein. In addition to that, Carmit is 1.27 times more volatile than Rotshtein. It trades about -0.03 of its total potential returns per unit of risk. Rotshtein is currently generating about 0.27 per unit of volatility. If you would invest  451,502  in Rotshtein on September 27, 2024 and sell it today you would earn a total of  131,498  from holding Rotshtein or generate 29.12% return on investment over 90 days.

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

Carmit  vs.  Rotshtein

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Rotshtein

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rotshtein are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rotshtein sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carmit and Rotshtein

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

The idea behind Carmit and Rotshtein 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.