Correlation Between Investcorp India and Carlyle

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

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

Diversification Opportunities for Investcorp India and Carlyle

0.39

Correlation Coefficient

Investcorp India  Carlyle

Weak diversification

The 3 months correlation between Investcorp and Carlyle is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Investcorp India Acquisition and Carlyle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Group and Investcorp India 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 Investcorp India Acquisition are associated (or correlated) with Carlyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlyle Group has no effect on the direction of Investcorp India i.e., Investcorp India and Carlyle go up and down completely randomly.

Pair Corralation between Investcorp India and Carlyle

Assuming the 90 days horizon Investcorp India is expected to generate 38.62 times less return on investment than Carlyle. But when comparing it to its historical volatility, Investcorp India Acquisition is 11.97 times less risky than Carlyle. It trades about 0.08 of its potential returns per unit of risk. Carlyle Group is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,977  in Carlyle Group on September 13, 2024 and sell it today you would earn a total of  1,504  from holding Carlyle Group or generate 37.82% return on investment over 90 days.

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

Investcorp India Acquisition  vs.  Carlyle Group

Investcorp India Acq

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Investcorp India Acquisition are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Investcorp India is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Carlyle Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investcorp India and Carlyle

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

The idea behind Investcorp India Acquisition and Carlyle 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..