Correlation Between Karat Packaging and Retailing Fund

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

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

Diversification Opportunities for Karat Packaging and Retailing Fund

0.78

Correlation Coefficient

Karat Packaging  Retailing Fund

Poor diversification

The 3 months correlation between Karat and Retailing is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Karat Packaging and Retailing Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retailing Fund Investor and Karat Packaging 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 Karat Packaging are associated (or correlated) with Retailing Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retailing Fund Investor has no effect on the direction of Karat Packaging i.e., Karat Packaging and Retailing Fund go up and down completely randomly.

Pair Corralation between Karat Packaging and Retailing Fund

Considering the 90-day investment horizon Karat Packaging is expected to generate 2.19 times more return on investment than Retailing Fund. However, Karat Packaging is 2.19 times more volatile than Retailing Fund Investor. It trades about 0.25 of its potential returns per unit of risk. Retailing Fund Investor is currently generating about 0.22 per unit of risk. If you would invest  2,444  in Karat Packaging on September 12, 2024 and sell it today you would earn a total of  726.00  from holding Karat Packaging or generate 29.71% return on investment over 90 days.

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

Karat Packaging  vs.  Retailing Fund Investor

Karat Packaging

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Karat Packaging are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Karat Packaging unveiled solid returns over the last few months and may actually be approaching a breakup point.

Retailing Fund Investor

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Retailing Fund Investor are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Retailing Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Karat Packaging and Retailing Fund

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

The idea behind Karat Packaging and Retailing Fund Investor 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.