Correlation Between Carawine Resources and Ecofibre

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

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

Diversification Opportunities for Carawine Resources and Ecofibre

0.17

Correlation Coefficient

Carawine Resources  Ecofibre

Average diversification

The 3 months correlation between Carawine and Ecofibre is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Carawine Resources Limited and Ecofibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofibre and Carawine Resources 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 Carawine Resources Limited are associated (or correlated) with Ecofibre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofibre has no effect on the direction of Carawine Resources i.e., Carawine Resources and Ecofibre go up and down completely randomly.

Pair Corralation between Carawine Resources and Ecofibre

Assuming the 90 days trading horizon Carawine Resources Limited is expected to under-perform the Ecofibre. But the stock apears to be less risky and, when comparing its historical volatility, Carawine Resources Limited is 2.09 times less risky than Ecofibre. The stock trades about -0.14 of its potential returns per unit of risk. The Ecofibre is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Ecofibre on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Ecofibre or generate 0.0% return on investment over 90 days.

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

Carawine Resources Limited  vs.  Ecofibre

Carawine Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carawine Resources Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Carawine Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ecofibre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecofibre has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Ecofibre is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Carawine Resources and Ecofibre

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

The idea behind Carawine Resources Limited and Ecofibre 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.