Correlation Between Carlyle and Seven Hills

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

By analyzing existing cross correlation between Carlyle Group and Seven Hills Realty, you can compare the effects of market volatilities on Carlyle and Seven Hills 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 Seven Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlyle and Seven Hills.

Diversification Opportunities for Carlyle and Seven Hills

-0.32

Correlation Coefficient

Carlyle  Seven Hills

Very good diversification

The 3 months correlation between Carlyle and Seven is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Seven Hills Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven Hills Realty 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 Seven Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven Hills Realty has no effect on the direction of Carlyle i.e., Carlyle and Seven Hills go up and down completely randomly.

Pair Corralation between Carlyle and Seven Hills

Allowing for the 90-day total investment horizon Carlyle Group is expected to generate 1.24 times more return on investment than Seven Hills. However, Carlyle is 1.24 times more volatile than Seven Hills Realty. It trades about 0.19 of its potential returns per unit of risk. Seven Hills Realty is currently generating about 0.01 per unit of risk. If you would invest  4,080  in Carlyle Group on September 15, 2024 and sell it today you would earn a total of  1,184  from holding Carlyle Group or generate 29.02% return on investment over 90 days.

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

Carlyle Group  vs.  Seven Hills Realty

Carlyle Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 15 (%) 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.

Seven Hills Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seven Hills Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Seven Hills is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Carlyle and Seven Hills

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

The idea behind Carlyle Group and Seven Hills Realty 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.