Correlation Between Carabao Group and TAC Consumer

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

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

Diversification Opportunities for Carabao Group and TAC Consumer

-0.07

Correlation Coefficient

Carabao Group  TAC Consumer

Good diversification

The 3 months correlation between Carabao and TAC is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Carabao Group Public and TAC Consumer Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAC Consumer Public and Carabao Group 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 Carabao Group Public are associated (or correlated) with TAC Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAC Consumer Public has no effect on the direction of Carabao Group i.e., Carabao Group and TAC Consumer go up and down completely randomly.

Pair Corralation between Carabao Group and TAC Consumer

Assuming the 90 days trading horizon Carabao Group Public is expected to under-perform the TAC Consumer. In addition to that, Carabao Group is 1.71 times more volatile than TAC Consumer Public. It trades about -0.13 of its total potential returns per unit of risk. TAC Consumer Public is currently generating about -0.02 per unit of volatility. If you would invest  464.00  in TAC Consumer Public on December 29, 2024 and sell it today you would lose (12.00) from holding TAC Consumer Public or give up 2.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Carabao Group Public  vs.  TAC Consumer Public

Carabao Group Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carabao Group Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

TAC Consumer Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days TAC Consumer Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, TAC Consumer is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Carabao Group and TAC Consumer

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

The idea behind Carabao Group Public and TAC Consumer Public 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.