Correlation Between Carabao Group and TQM Public

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

Diversification Opportunities for Carabao Group and TQM Public

-0.06

Correlation Coefficient

Carabao Group  TQM Public

Good diversification

The 3 months correlation between Carabao and TQM is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Carabao Group Public and TQM Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TQM 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 TQM Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TQM Public has no effect on the direction of Carabao Group i.e., Carabao Group and TQM Public go up and down completely randomly.

Pair Corralation between Carabao Group and TQM Public

Assuming the 90 days trading horizon Carabao Group Public is expected to under-perform the TQM Public. But the stock apears to be less risky and, when comparing its historical volatility, Carabao Group Public is 1.28 times less risky than TQM Public. The stock trades about -0.05 of its potential returns per unit of risk. The TQM Public is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,270  in TQM Public on September 24, 2024 and sell it today you would earn a total of  10.00  from holding TQM Public or generate 0.44% 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.  TQM 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.

TQM Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TQM 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 primary indicators 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 TQM Public

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

The idea behind Carabao Group Public and TQM 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.