Correlation Between Central Garden and Kaival Brands

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

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

Diversification Opportunities for Central Garden and Kaival Brands

-0.63

Correlation Coefficient

Central Garden  Kaival Brands

Excellent diversification

The 3 months correlation between Central and Kaival is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Kaival Brands Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaival Brands Innovations and Central Garden 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 Central Garden Pet are associated (or correlated) with Kaival Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaival Brands Innovations has no effect on the direction of Central Garden i.e., Central Garden and Kaival Brands go up and down completely randomly.

Pair Corralation between Central Garden and Kaival Brands

Assuming the 90 days horizon Central Garden is expected to generate 8.76 times less return on investment than Kaival Brands. But when comparing it to its historical volatility, Central Garden Pet is 10.63 times less risky than Kaival Brands. It trades about 0.03 of its potential returns per unit of risk. Kaival Brands Innovations is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,810  in Kaival Brands Innovations on September 29, 2024 and sell it today you would lose (1,725) from holding Kaival Brands Innovations or give up 95.3% of portfolio value over 90 days.

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

Central Garden Pet  vs.  Kaival Brands Innovations

Central Garden Pet

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Garden may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kaival Brands Innovations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaival Brands Innovations 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 basic 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 Central Garden and Kaival Brands

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

The idea behind Central Garden Pet and Kaival Brands Innovations 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.