Correlation Between Karooooo and Momentive Global

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

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

Diversification Opportunities for Karooooo and Momentive Global

0.21

Correlation Coefficient

Karooooo  Momentive Global

Modest diversification

The 3 months correlation between Karooooo and Momentive is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Karooooo and Momentive Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Momentive Global and Karooooo 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 Karooooo are associated (or correlated) with Momentive Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Momentive Global has no effect on the direction of Karooooo i.e., Karooooo and Momentive Global go up and down completely randomly.

Pair Corralation between Karooooo and Momentive Global

If you would invest  4,040  in Karooooo on September 19, 2024 and sell it today you would earn a total of  496.00  from holding Karooooo or generate 12.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Karooooo  vs.  Momentive Global

Karooooo

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Karooooo are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Karooooo displayed solid returns over the last few months and may actually be approaching a breakup point.

Momentive Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Momentive Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Momentive Global is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Karooooo and Momentive Global

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

The idea behind Karooooo and Momentive Global 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.