Correlation Between Birks and CarPartsCom

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

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

Diversification Opportunities for Birks and CarPartsCom

-0.63

Correlation Coefficient

Birks  CarPartsCom

Excellent diversification

The 3 months correlation between Birks and CarPartsCom is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Birks Group and CarPartsCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarPartsCom and Birks 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 Birks Group are associated (or correlated) with CarPartsCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarPartsCom has no effect on the direction of Birks i.e., Birks and CarPartsCom go up and down completely randomly.

Pair Corralation between Birks and CarPartsCom

Considering the 90-day investment horizon Birks Group is expected to under-perform the CarPartsCom. But the stock apears to be less risky and, when comparing its historical volatility, Birks Group is 1.49 times less risky than CarPartsCom. The stock trades about -0.26 of its potential returns per unit of risk. The CarPartsCom is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  81.00  in CarPartsCom on September 3, 2024 and sell it today you would earn a total of  15.00  from holding CarPartsCom or generate 18.52% return on investment over 90 days.

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

Birks Group  vs.  CarPartsCom

Birks Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Birks Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

CarPartsCom

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CarPartsCom are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CarPartsCom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Birks and CarPartsCom

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

The idea behind Birks Group and CarPartsCom 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.