Correlation Between Eightco Holdings and Karat Packaging

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

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

Diversification Opportunities for Eightco Holdings and Karat Packaging

-0.43

Correlation Coefficient

Eightco Holdings  Karat Packaging

Very good diversification

The 3 months correlation between Eightco and Karat is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Eightco Holdings and Karat Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karat Packaging and Eightco Holdings 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 Eightco Holdings are associated (or correlated) with Karat Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karat Packaging has no effect on the direction of Eightco Holdings i.e., Eightco Holdings and Karat Packaging go up and down completely randomly.

Pair Corralation between Eightco Holdings and Karat Packaging

Given the investment horizon of 90 days Eightco Holdings is expected to generate 1.04 times less return on investment than Karat Packaging. In addition to that, Eightco Holdings is 5.68 times more volatile than Karat Packaging. It trades about 0.04 of its total potential returns per unit of risk. Karat Packaging is currently generating about 0.23 per unit of volatility. If you would invest  2,513  in Karat Packaging on September 14, 2024 and sell it today you would earn a total of  695.00  from holding Karat Packaging or generate 27.66% return on investment over 90 days.

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

Eightco Holdings  vs.  Karat Packaging

Eightco Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eightco Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Eightco Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Karat Packaging

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Karat Packaging are ranked lower than 18 (%) 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.

Pair Trading with Eightco Holdings and Karat Packaging

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

The idea behind Eightco Holdings and Karat Packaging 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.