Correlation Between Karat Packaging and IShares Future

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

By analyzing existing cross correlation between Karat Packaging and iShares Future AI, you can compare the effects of market volatilities on Karat Packaging and IShares Future 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 Karat Packaging with a short position of IShares Future. Check out your portfolio center. Please also check ongoing floating volatility patterns of Karat Packaging and IShares Future.

Diversification Opportunities for Karat Packaging and IShares Future

0.52

Correlation Coefficient

Karat Packaging  IShares Future

Very weak diversification

The 3 months correlation between Karat and IShares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Karat Packaging and iShares Future AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Future AI and Karat Packaging 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 Karat Packaging are associated (or correlated) with IShares Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Future AI has no effect on the direction of Karat Packaging i.e., Karat Packaging and IShares Future go up and down completely randomly.

Pair Corralation between Karat Packaging and IShares Future

Considering the 90-day investment horizon Karat Packaging is expected to generate 0.87 times more return on investment than IShares Future. However, Karat Packaging is 1.15 times less risky than IShares Future. It trades about -0.06 of its potential returns per unit of risk. iShares Future AI is currently generating about -0.09 per unit of risk. If you would invest  2,949  in Karat Packaging on December 28, 2024 and sell it today you would lose (239.50) from holding Karat Packaging or give up 8.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Karat Packaging  vs.  iShares Future AI

Karat Packaging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Karat Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

iShares Future AI

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Future AI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Karat Packaging and IShares Future

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

The idea behind Karat Packaging and iShares Future AI 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.