Correlation Between Carbon Revolution and Destination

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

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

Diversification Opportunities for Carbon Revolution and Destination

0.16

Correlation Coefficient

Carbon Revolution  Destination

Average diversification

The 3 months correlation between Carbon and Destination is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Carbon Revolution Public and Destination XL Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destination XL Group and Carbon Revolution 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 Carbon Revolution Public are associated (or correlated) with Destination. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destination XL Group has no effect on the direction of Carbon Revolution i.e., Carbon Revolution and Destination go up and down completely randomly.

Pair Corralation between Carbon Revolution and Destination

Assuming the 90 days horizon Carbon Revolution Public is expected to generate 6.33 times more return on investment than Destination. However, Carbon Revolution is 6.33 times more volatile than Destination XL Group. It trades about 0.13 of its potential returns per unit of risk. Destination XL Group is currently generating about 0.01 per unit of risk. If you would invest  3.90  in Carbon Revolution Public on October 8, 2024 and sell it today you would earn a total of  2.60  from holding Carbon Revolution Public or generate 66.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	74.19%
Values	Daily Returns

Carbon Revolution Public  vs.  Destination XL Group

Carbon Revolution Public

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

Destination XL Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destination XL Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Destination is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carbon Revolution and Destination

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

The idea behind Carbon Revolution Public and Destination XL Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.