Correlation Between Investor and Carbon Streaming

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

By analyzing existing cross correlation between Investor AB ser and Carbon Streaming Corp, you can compare the effects of market volatilities on Investor and Carbon Streaming 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 Investor with a short position of Carbon Streaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investor and Carbon Streaming.

Diversification Opportunities for Investor and Carbon Streaming

0.77

Correlation Coefficient

Investor  Carbon Streaming

Poor diversification

The 3 months correlation between Investor and Carbon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and Carbon Streaming Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carbon Streaming Corp and Investor 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 Investor AB ser are associated (or correlated) with Carbon Streaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carbon Streaming Corp has no effect on the direction of Investor i.e., Investor and Carbon Streaming go up and down completely randomly.

Pair Corralation between Investor and Carbon Streaming

Assuming the 90 days horizon Investor AB ser is expected to generate 0.26 times more return on investment than Carbon Streaming. However, Investor AB ser is 3.88 times less risky than Carbon Streaming. It trades about 0.05 of its potential returns per unit of risk. Carbon Streaming Corp is currently generating about -0.01 per unit of risk. If you would invest  1,817  in Investor AB ser on September 30, 2024 and sell it today you would earn a total of  797.00  from holding Investor AB ser or generate 43.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.57%
Values	Daily Returns

Investor AB ser  vs.  Carbon Streaming Corp

Investor AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investor AB ser 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 fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Carbon Streaming Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carbon Streaming Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Carbon Streaming is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Investor and Carbon Streaming

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

The idea behind Investor AB ser and Carbon Streaming Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.