Correlation Between Karat Packaging and Greif Bros

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

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

Diversification Opportunities for Karat Packaging and Greif Bros

0.26

Correlation Coefficient

Karat Packaging  Greif Bros

Modest diversification

The 3 months correlation between Karat and Greif is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Karat Packaging and Greif Bros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greif Bros 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 Greif Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greif Bros has no effect on the direction of Karat Packaging i.e., Karat Packaging and Greif Bros go up and down completely randomly.

Pair Corralation between Karat Packaging and Greif Bros

Considering the 90-day investment horizon Karat Packaging is expected to generate 1.88 times more return on investment than Greif Bros. However, Karat Packaging is 1.88 times more volatile than Greif Bros. It trades about -0.04 of its potential returns per unit of risk. Greif Bros is currently generating about -0.13 per unit of risk. If you would invest  3,123  in Karat Packaging on November 28, 2024 and sell it today you would lose (71.00) from holding Karat Packaging or give up 2.27% of portfolio value over 90 days.

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

Karat Packaging  vs.  Greif Bros

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 comparatively stable basic indicators, Karat Packaging is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Greif Bros

Risk-Adjusted Performance

Very Weak

Over the last 90 days Greif Bros has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Karat Packaging and Greif Bros

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

The idea behind Karat Packaging and Greif Bros 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.