Correlation Between Karelia Tobacco and Profile Systems

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

By analyzing existing cross correlation between Karelia Tobacco and Profile Systems Software, you can compare the effects of market volatilities on Karelia Tobacco and Profile Systems 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 Karelia Tobacco with a short position of Profile Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Karelia Tobacco and Profile Systems.

Diversification Opportunities for Karelia Tobacco and Profile Systems

0.53

Correlation Coefficient

Karelia Tobacco  Profile Systems

Very weak diversification

The 3 months correlation between Karelia and Profile is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Karelia Tobacco and Profile Systems Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profile Systems Software and Karelia Tobacco 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 Karelia Tobacco are associated (or correlated) with Profile Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profile Systems Software has no effect on the direction of Karelia Tobacco i.e., Karelia Tobacco and Profile Systems go up and down completely randomly.

Pair Corralation between Karelia Tobacco and Profile Systems

Assuming the 90 days trading horizon Karelia Tobacco is expected to under-perform the Profile Systems. In addition to that, Karelia Tobacco is 1.29 times more volatile than Profile Systems Software. It trades about -0.07 of its total potential returns per unit of risk. Profile Systems Software is currently generating about 0.01 per unit of volatility. If you would invest  525.00  in Profile Systems Software on December 31, 2024 and sell it today you would earn a total of  2.00  from holding Profile Systems Software or generate 0.38% return on investment over 90 days.

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

Karelia Tobacco  vs.  Profile Systems Software

Karelia Tobacco

Risk-Adjusted Performance

Very Weak

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

Profile Systems Software

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Karelia Tobacco and Profile Systems

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

The idea behind Karelia Tobacco and Profile Systems Software 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.