Correlation Between Cabot and NewMarket

Can any of the company-specific risk be diversified away by investing in both Cabot and NewMarket 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 Cabot and NewMarket into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cabot and NewMarket, you can compare the effects of market volatilities on Cabot and NewMarket 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 Cabot with a short position of NewMarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot and NewMarket.

Diversification Opportunities for Cabot and NewMarket

0.43

Correlation Coefficient

Cabot  NewMarket

Very weak diversification

The 3 months correlation between Cabot and NewMarket is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and NewMarket in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMarket and Cabot 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 Cabot are associated (or correlated) with NewMarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewMarket has no effect on the direction of Cabot i.e., Cabot and NewMarket go up and down completely randomly.

Pair Corralation between Cabot and NewMarket

Considering the 90-day investment horizon Cabot is expected to under-perform the NewMarket. In addition to that, Cabot is 1.03 times more volatile than NewMarket. It trades about -0.24 of its total potential returns per unit of risk. NewMarket is currently generating about 0.07 per unit of volatility. If you would invest  53,110  in NewMarket on November 28, 2024 and sell it today you would earn a total of  3,163  from holding NewMarket or generate 5.96% return on investment over 90 days.

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

Cabot  vs.  NewMarket

Cabot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

NewMarket

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NewMarket are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, NewMarket may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Cabot and NewMarket

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

The idea behind Cabot and NewMarket 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.