Correlation Between Carlyle and RENN Fund

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

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

Diversification Opportunities for Carlyle and RENN Fund

0.83

Correlation Coefficient

Carlyle  RENN Fund

Very poor diversification

The 3 months correlation between Carlyle and RENN is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and RENN Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RENN Fund and Carlyle 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 Carlyle Group are associated (or correlated) with RENN Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RENN Fund has no effect on the direction of Carlyle i.e., Carlyle and RENN Fund go up and down completely randomly.

Pair Corralation between Carlyle and RENN Fund

Allowing for the 90-day total investment horizon Carlyle is expected to generate 1.19 times less return on investment than RENN Fund. But when comparing it to its historical volatility, Carlyle Group is 1.46 times less risky than RENN Fund. It trades about 0.25 of its potential returns per unit of risk. RENN Fund is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  186.00  in RENN Fund on September 4, 2024 and sell it today you would earn a total of  85.00  from holding RENN Fund or generate 45.7% return on investment over 90 days.

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

Carlyle Group  vs.  RENN Fund

Carlyle Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

RENN Fund

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RENN Fund are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, RENN Fund reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlyle and RENN Fund

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

The idea behind Carlyle Group and RENN Fund 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.