Correlation Between Cabot and Perimeter Solutions

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

By analyzing existing cross correlation between Cabot and Perimeter Solutions SA, you can compare the effects of market volatilities on Cabot and Perimeter Solutions 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 Perimeter Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot and Perimeter Solutions.

Diversification Opportunities for Cabot and Perimeter Solutions

0.72

Correlation Coefficient

Cabot  Perimeter Solutions

Poor diversification

The 3 months correlation between Cabot and Perimeter is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Perimeter Solutions SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perimeter Solutions 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 Perimeter Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perimeter Solutions has no effect on the direction of Cabot i.e., Cabot and Perimeter Solutions go up and down completely randomly.

Pair Corralation between Cabot and Perimeter Solutions

Considering the 90-day investment horizon Cabot is expected to generate 2.44 times less return on investment than Perimeter Solutions. But when comparing it to its historical volatility, Cabot is 1.41 times less risky than Perimeter Solutions. It trades about 0.04 of its potential returns per unit of risk. Perimeter Solutions SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,172  in Perimeter Solutions SA on September 12, 2024 and sell it today you would earn a total of  111.00  from holding Perimeter Solutions SA or generate 9.47% return on investment over 90 days.

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

Cabot  vs.  Perimeter Solutions SA

Cabot

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cabot are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Cabot is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Perimeter Solutions

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perimeter Solutions SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Perimeter Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cabot and Perimeter Solutions

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

The idea behind Cabot and Perimeter Solutions SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.