Correlation Between Caravelle International and Hafnia

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

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

Diversification Opportunities for Caravelle International and Hafnia

-0.65

Correlation Coefficient

Caravelle International  Hafnia

Excellent diversification

The 3 months correlation between Caravelle and Hafnia is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Caravelle International Group and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited and Caravelle International 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 Caravelle International Group are associated (or correlated) with Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Caravelle International i.e., Caravelle International and Hafnia go up and down completely randomly.

Pair Corralation between Caravelle International and Hafnia

Given the investment horizon of 90 days Caravelle International Group is expected to generate 4.12 times more return on investment than Hafnia. However, Caravelle International is 4.12 times more volatile than Hafnia Limited. It trades about 0.09 of its potential returns per unit of risk. Hafnia Limited is currently generating about 0.02 per unit of risk. If you would invest  61.00  in Caravelle International Group on October 1, 2024 and sell it today you would earn a total of  180.00  from holding Caravelle International Group or generate 295.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.62%
Values	Daily Returns

Caravelle International Group  vs.  Hafnia Limited

Caravelle International

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caravelle International Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Caravelle International displayed solid returns over the last few months and may actually be approaching a breakup point.

Hafnia Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Caravelle International and Hafnia

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

The idea behind Caravelle International Group and Hafnia Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.