Correlation Between Carabao Group and AP Public

Can any of the company-specific risk be diversified away by investing in both Carabao Group and AP Public 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 AP Public 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 AP Public, you can compare the effects of market volatilities on Carabao Group and AP Public 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 AP Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carabao Group and AP Public.

Diversification Opportunities for Carabao Group and AP Public

-0.07

Correlation Coefficient

Carabao Group  AP Public

Good diversification

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

Pair Corralation between Carabao Group and AP Public

Assuming the 90 days trading horizon Carabao Group Public is expected to generate 1.15 times more return on investment than AP Public. However, Carabao Group is 1.15 times more volatile than AP Public. It trades about 0.04 of its potential returns per unit of risk. AP Public is currently generating about -0.04 per unit of risk. If you would invest  6,570  in Carabao Group Public on September 24, 2024 and sell it today you would earn a total of  1,280  from holding Carabao Group Public or generate 19.48% return on investment over 90 days.

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

Carabao Group Public  vs.  AP Public

Carabao Group Public

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carabao Group Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Carabao Group is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

AP Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AP 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 quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Carabao Group and AP Public

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

The idea behind Carabao Group Public and AP 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 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.