Correlation Between Carters and Vita Coco

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

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

Diversification Opportunities for Carters and Vita Coco

-0.79

Correlation Coefficient

Carters  Vita Coco

Pay attention - limited upside

The 3 months correlation between Carters and Vita is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco and Carters 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 Carters are associated (or correlated) with Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of Carters i.e., Carters and Vita Coco go up and down completely randomly.

Pair Corralation between Carters and Vita Coco

Considering the 90-day investment horizon Carters is expected to under-perform the Vita Coco. But the stock apears to be less risky and, when comparing its historical volatility, Carters is 1.53 times less risky than Vita Coco. The stock trades about -0.01 of its potential returns per unit of risk. The Vita Coco is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,350  in Vita Coco on September 24, 2024 and sell it today you would earn a total of  2,223  from holding Vita Coco or generate 164.67% return on investment over 90 days.

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

Carters  vs.  Vita Coco

Carters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Vita Coco

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carters and Vita Coco

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

The idea behind Carters and Vita Coco 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.