Correlation Between Kaival Brands and Central Garden

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

By analyzing existing cross correlation between Kaival Brands Innovations and Central Garden Pet, you can compare the effects of market volatilities on Kaival Brands and Central Garden 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 Kaival Brands with a short position of Central Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaival Brands and Central Garden.

Diversification Opportunities for Kaival Brands and Central Garden

-0.6

Correlation Coefficient

Kaival Brands  Central Garden

Excellent diversification

The 3 months correlation between Kaival and Central is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Kaival Brands Innovations and Central Garden Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Garden Pet and Kaival Brands 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 Kaival Brands Innovations are associated (or correlated) with Central Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Garden Pet has no effect on the direction of Kaival Brands i.e., Kaival Brands and Central Garden go up and down completely randomly.

Pair Corralation between Kaival Brands and Central Garden

Given the investment horizon of 90 days Kaival Brands Innovations is expected to generate 10.63 times more return on investment than Central Garden. However, Kaival Brands is 10.63 times more volatile than Central Garden Pet. It trades about 0.02 of its potential returns per unit of risk. Central Garden Pet is currently generating about 0.02 per unit of risk. If you would invest  1,810  in Kaival Brands Innovations on September 28, 2024 and sell it today you would lose (1,729) from holding Kaival Brands Innovations or give up 95.5% of portfolio value over 90 days.

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

Kaival Brands Innovations  vs.  Central Garden Pet

Kaival Brands Innovations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaival Brands Innovations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Central Garden Pet

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Garden may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kaival Brands and Central Garden

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

The idea behind Kaival Brands Innovations and Central Garden Pet 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.