Correlation Between Core Molding and Cabot

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

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

Diversification Opportunities for Core Molding and Cabot

0.74

Correlation Coefficient

Core Molding  Cabot

Poor diversification

The 3 months correlation between Core and Cabot is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Core Molding Technologies and Cabot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot and Core Molding 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 Core Molding Technologies are associated (or correlated) with Cabot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot has no effect on the direction of Core Molding i.e., Core Molding and Cabot go up and down completely randomly.

Pair Corralation between Core Molding and Cabot

Considering the 90-day investment horizon Core Molding Technologies is expected to under-perform the Cabot. In addition to that, Core Molding is 1.34 times more volatile than Cabot. It trades about -0.07 of its total potential returns per unit of risk. Cabot is currently generating about -0.08 per unit of volatility. If you would invest  9,122  in Cabot on December 27, 2024 and sell it today you would lose (765.00) from holding Cabot or give up 8.39% of portfolio value over 90 days.

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

Core Molding Technologies  vs.  Cabot

Core Molding Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Core Molding Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 latest weak performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Core Molding and Cabot

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

The idea behind Core Molding Technologies and Cabot 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.