Correlation Between Keells Food and Carson Cumberbatch

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

By analyzing existing cross correlation between Keells Food Products and Carson Cumberbatch PLC, you can compare the effects of market volatilities on Keells Food and Carson Cumberbatch 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 Keells Food with a short position of Carson Cumberbatch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keells Food and Carson Cumberbatch.

Diversification Opportunities for Keells Food and Carson Cumberbatch

0.32

Correlation Coefficient

Keells Food  Carson Cumberbatch

Weak diversification

The 3 months correlation between Keells and Carson is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Keells Food Products and Carson Cumberbatch PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carson Cumberbatch PLC and Keells Food 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 Keells Food Products are associated (or correlated) with Carson Cumberbatch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carson Cumberbatch PLC has no effect on the direction of Keells Food i.e., Keells Food and Carson Cumberbatch go up and down completely randomly.

Pair Corralation between Keells Food and Carson Cumberbatch

Assuming the 90 days trading horizon Keells Food is expected to generate 5.78 times less return on investment than Carson Cumberbatch. But when comparing it to its historical volatility, Keells Food Products is 1.5 times less risky than Carson Cumberbatch. It trades about 0.04 of its potential returns per unit of risk. Carson Cumberbatch PLC is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  33,800  in Carson Cumberbatch PLC on December 5, 2024 and sell it today you would earn a total of  8,925  from holding Carson Cumberbatch PLC or generate 26.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.49%
Values	Daily Returns

Keells Food Products  vs.  Carson Cumberbatch PLC

Keells Food Products

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Keells Food Products are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Keells Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Carson Cumberbatch PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carson Cumberbatch PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Carson Cumberbatch sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Keells Food and Carson Cumberbatch

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

The idea behind Keells Food Products and Carson Cumberbatch PLC 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.