Correlation Between Karmarts Public and Mena Transport

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

By analyzing existing cross correlation between Karmarts Public and Mena Transport Public, you can compare the effects of market volatilities on Karmarts Public and Mena Transport 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 Karmarts Public with a short position of Mena Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Karmarts Public and Mena Transport.

Diversification Opportunities for Karmarts Public and Mena Transport

0.3

Correlation Coefficient

Karmarts Public  Mena Transport

Weak diversification

The 3 months correlation between Karmarts and Mena is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Karmarts Public and Mena Transport Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mena Transport Public and Karmarts Public 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 Karmarts Public are associated (or correlated) with Mena Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mena Transport Public has no effect on the direction of Karmarts Public i.e., Karmarts Public and Mena Transport go up and down completely randomly.

Pair Corralation between Karmarts Public and Mena Transport

Assuming the 90 days trading horizon Karmarts Public is expected to generate 1.26 times more return on investment than Mena Transport. However, Karmarts Public is 1.26 times more volatile than Mena Transport Public. It trades about -0.01 of its potential returns per unit of risk. Mena Transport Public is currently generating about -0.05 per unit of risk. If you would invest  1,179  in Karmarts Public on September 16, 2024 and sell it today you would lose (39.00) from holding Karmarts Public or give up 3.31% of portfolio value over 90 days.

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

Karmarts Public  vs.  Mena Transport Public

Karmarts Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mena Transport Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mena Transport Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Karmarts Public and Mena Transport

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

The idea behind Karmarts Public and Mena Transport Public 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.