Correlation Between Carabao Group and Tipco Asphalt

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

Diversification Opportunities for Carabao Group and Tipco Asphalt

0.2

Correlation Coefficient

Carabao Group  Tipco Asphalt

Modest diversification

The 3 months correlation between Carabao and Tipco is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Carabao Group Public and Tipco Asphalt Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tipco Asphalt 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 Tipco Asphalt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tipco Asphalt Public has no effect on the direction of Carabao Group i.e., Carabao Group and Tipco Asphalt go up and down completely randomly.

Pair Corralation between Carabao Group and Tipco Asphalt

Assuming the 90 days trading horizon Carabao Group Public is expected to under-perform the Tipco Asphalt. In addition to that, Carabao Group is 1.32 times more volatile than Tipco Asphalt Public. It trades about -0.03 of its total potential returns per unit of risk. Tipco Asphalt Public is currently generating about -0.02 per unit of volatility. If you would invest  1,850  in Tipco Asphalt Public on October 20, 2024 and sell it today you would lose (50.00) from holding Tipco Asphalt Public or give up 2.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Carabao Group Public  vs.  Tipco Asphalt Public

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.

Tipco Asphalt Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tipco Asphalt Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Tipco Asphalt is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Carabao Group and Tipco Asphalt

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

The idea behind Carabao Group Public and Tipco Asphalt 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.