Correlation Between Carriage Services and Service International

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

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

Diversification Opportunities for Carriage Services and Service International

-0.07

Correlation Coefficient

Carriage Services  Service International

Good diversification

The 3 months correlation between Carriage and Service is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Carriage Services and Service International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service International and Carriage Services 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 Carriage Services are associated (or correlated) with Service International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service International has no effect on the direction of Carriage Services i.e., Carriage Services and Service International go up and down completely randomly.

Pair Corralation between Carriage Services and Service International

Considering the 90-day investment horizon Carriage Services is expected to under-perform the Service International. But the stock apears to be less risky and, when comparing its historical volatility, Carriage Services is 1.34 times less risky than Service International. The stock trades about -0.02 of its potential returns per unit of risk. The Service International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,950  in Service International on December 29, 2024 and sell it today you would earn a total of  29.00  from holding Service International or generate 0.36% return on investment over 90 days.

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

Carriage Services  vs.  Service International

Carriage Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carriage Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Carriage Services is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Service International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Service International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Service International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Carriage Services and Service International

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

The idea behind Carriage Services and Service International 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.