Correlation Between Carabao Group and Exotic Food

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

Diversification Opportunities for Carabao Group and Exotic Food

0.64

Correlation Coefficient

Carabao Group  Exotic Food

Poor diversification

The 3 months correlation between Carabao and Exotic is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Carabao Group Public and Exotic Food Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exotic Food 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 Exotic Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exotic Food Public has no effect on the direction of Carabao Group i.e., Carabao Group and Exotic Food go up and down completely randomly.

Pair Corralation between Carabao Group and Exotic Food

Assuming the 90 days trading horizon Carabao Group Public is expected to generate 0.6 times more return on investment than Exotic Food. However, Carabao Group Public is 1.66 times less risky than Exotic Food. It trades about -0.12 of its potential returns per unit of risk. Exotic Food Public is currently generating about -0.1 per unit of risk. If you would invest  7,775  in Carabao Group Public on December 4, 2024 and sell it today you would lose (1,250) from holding Carabao Group Public or give up 16.08% of portfolio value over 90 days.

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

Carabao Group Public  vs.  Exotic Food 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 weak performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Exotic Food Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exotic Food 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 April 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 Exotic Food

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

The idea behind Carabao Group Public and Exotic Food 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.