Correlation Between Carters and PSQ Holdings

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

By analyzing existing cross correlation between Carters and PSQ Holdings, you can compare the effects of market volatilities on Carters and PSQ Holdings 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 PSQ Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carters and PSQ Holdings.

Diversification Opportunities for Carters and PSQ Holdings

-0.15

Correlation Coefficient

Carters  PSQ Holdings

Good diversification

The 3 months correlation between Carters and PSQ is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Carters and PSQ Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSQ Holdings 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 PSQ Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSQ Holdings has no effect on the direction of Carters i.e., Carters and PSQ Holdings go up and down completely randomly.

Pair Corralation between Carters and PSQ Holdings

Considering the 90-day investment horizon Carters is expected to under-perform the PSQ Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Carters is 2.86 times less risky than PSQ Holdings. The stock trades about -0.19 of its potential returns per unit of risk. The PSQ Holdings is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  423.00  in PSQ Holdings on October 15, 2024 and sell it today you would lose (32.00) from holding PSQ Holdings or give up 7.57% of portfolio value over 90 days.

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

Carters  vs.  PSQ Holdings

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

PSQ Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PSQ Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, PSQ Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carters and PSQ Holdings

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

The idea behind Carters and PSQ Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.