Correlation Between Carabao Group and Asian Sea

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

Diversification Opportunities for Carabao Group and Asian Sea

0.4

Correlation Coefficient

Carabao Group  Asian Sea

Very weak diversification

The 3 months correlation between Carabao and Asian is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Carabao Group Public and Asian Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Sea 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 Asian Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Sea has no effect on the direction of Carabao Group i.e., Carabao Group and Asian Sea go up and down completely randomly.

Pair Corralation between Carabao Group and Asian Sea

Assuming the 90 days trading horizon Carabao Group Public is expected to generate 1.94 times more return on investment than Asian Sea. However, Carabao Group is 1.94 times more volatile than Asian Sea. It trades about 0.02 of its potential returns per unit of risk. Asian Sea is currently generating about -0.11 per unit of risk. If you would invest  7,900  in Carabao Group Public on October 27, 2024 and sell it today you would earn a total of  50.00  from holding Carabao Group Public or generate 0.63% return on investment over 90 days.

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

Carabao Group Public  vs.  Asian Sea

Carabao Group Public

Risk-Adjusted Performance

0 of 100

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 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.

Asian Sea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asian Sea 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Carabao Group and Asian Sea

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

The idea behind Carabao Group Public and Asian Sea 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.