Correlation Between Continental Beverage and Kasten

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

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

Diversification Opportunities for Continental Beverage and Kasten

-0.51

Correlation Coefficient

Continental Beverage  Kasten

Excellent diversification

The 3 months correlation between Continental and Kasten is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Continental Beverage Brands and Kasten Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kasten Inc and Continental Beverage 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 Continental Beverage Brands are associated (or correlated) with Kasten. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kasten Inc has no effect on the direction of Continental Beverage i.e., Continental Beverage and Kasten go up and down completely randomly.

Pair Corralation between Continental Beverage and Kasten

Given the investment horizon of 90 days Continental Beverage Brands is expected to generate 10.58 times more return on investment than Kasten. However, Continental Beverage is 10.58 times more volatile than Kasten Inc. It trades about 0.16 of its potential returns per unit of risk. Kasten Inc is currently generating about 0.06 per unit of risk. If you would invest  15.00  in Continental Beverage Brands on September 4, 2024 and sell it today you would earn a total of  60.00  from holding Continental Beverage Brands or generate 400.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Continental Beverage Brands  vs.  Kasten Inc

Continental Beverage

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Beverage Brands are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Continental Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Kasten Inc

Risk-Adjusted Performance

5 of 100

Insignificant

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

Pair Trading with Continental Beverage and Kasten

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

The idea behind Continental Beverage Brands and Kasten Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.