Correlation Between Karat Packaging and Good Natured

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

By analyzing existing cross correlation between Karat Packaging and Good Natured Products, you can compare the effects of market volatilities on Karat Packaging and Good Natured 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 Good Natured. Check out your portfolio center. Please also check ongoing floating volatility patterns of Karat Packaging and Good Natured.

Diversification Opportunities for Karat Packaging and Good Natured

-0.44

Correlation Coefficient

Karat Packaging  Good Natured

Very good diversification

The 3 months correlation between Karat and Good is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Karat Packaging and Good Natured Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Natured Products 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 Good Natured. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Natured Products has no effect on the direction of Karat Packaging i.e., Karat Packaging and Good Natured go up and down completely randomly.

Pair Corralation between Karat Packaging and Good Natured

Considering the 90-day investment horizon Karat Packaging is expected to generate 1.57 times less return on investment than Good Natured. In addition to that, Karat Packaging is 1.1 times more volatile than Good Natured Products. It trades about 0.15 of its total potential returns per unit of risk. Good Natured Products is currently generating about 0.25 per unit of volatility. If you would invest  0.50  in Good Natured Products on October 6, 2024 and sell it today you would earn a total of  0.04  from holding Good Natured Products or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	39.02%
Values	Daily Returns

Karat Packaging  vs.  Good Natured Products

Karat Packaging

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Karat Packaging are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Karat Packaging unveiled solid returns over the last few months and may actually be approaching a breakup point.

Good Natured Products

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Good Natured Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Good Natured reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Karat Packaging and Good Natured

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

The idea behind Karat Packaging and Good Natured Products 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.