Correlation Between CA Sales and Famous Brands

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

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

Diversification Opportunities for CA Sales and Famous Brands

0.03

Correlation Coefficient

CA Sales  Famous Brands

Significant diversification

The 3 months correlation between CAA and Famous is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CA Sales Holdings and Famous Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Famous Brands and CA Sales 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 CA Sales Holdings are associated (or correlated) with Famous Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Famous Brands has no effect on the direction of CA Sales i.e., CA Sales and Famous Brands go up and down completely randomly.

Pair Corralation between CA Sales and Famous Brands

Assuming the 90 days trading horizon CA Sales Holdings is expected to under-perform the Famous Brands. In addition to that, CA Sales is 2.17 times more volatile than Famous Brands. It trades about -0.11 of its total potential returns per unit of risk. Famous Brands is currently generating about -0.19 per unit of volatility. If you would invest  680,600  in Famous Brands on October 24, 2024 and sell it today you would lose (36,100) from holding Famous Brands or give up 5.3% of portfolio value over 90 days.

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

CA Sales Holdings  vs.  Famous Brands

CA Sales Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CA Sales Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, CA Sales is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Famous Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Famous Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Famous Brands is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CA Sales and Famous Brands

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

The idea behind CA Sales Holdings and Famous Brands 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.