Correlation Between General Commercial and Karelia Tobacco

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

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

Diversification Opportunities for General Commercial and Karelia Tobacco

-0.28

Correlation Coefficient

General Commercial  Karelia Tobacco

Very good diversification

The 3 months correlation between General and Karelia is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding General Commercial Industrial and Karelia Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karelia Tobacco and General Commercial 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 General Commercial Industrial are associated (or correlated) with Karelia Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karelia Tobacco has no effect on the direction of General Commercial i.e., General Commercial and Karelia Tobacco go up and down completely randomly.

Pair Corralation between General Commercial and Karelia Tobacco

Assuming the 90 days trading horizon General Commercial is expected to generate 5.67 times less return on investment than Karelia Tobacco. In addition to that, General Commercial is 1.69 times more volatile than Karelia Tobacco. It trades about 0.01 of its total potential returns per unit of risk. Karelia Tobacco is currently generating about 0.09 per unit of volatility. If you would invest  32,000  in Karelia Tobacco on September 13, 2024 and sell it today you would earn a total of  2,000  from holding Karelia Tobacco or generate 6.25% return on investment over 90 days.

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

General Commercial Industrial  vs.  Karelia Tobacco

General Commercial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Karelia Tobacco

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Karelia Tobacco are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Karelia Tobacco may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with General Commercial and Karelia Tobacco

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

The idea behind General Commercial Industrial and Karelia Tobacco 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.