Correlation Between Karat Packaging and Leisure Fund

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

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

Diversification Opportunities for Karat Packaging and Leisure Fund

0.94

Correlation Coefficient

Karat Packaging  Leisure Fund

Almost no diversification

The 3 months correlation between Karat and Leisure is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Karat Packaging and Leisure Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leisure Fund Class 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 Leisure Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leisure Fund Class has no effect on the direction of Karat Packaging i.e., Karat Packaging and Leisure Fund go up and down completely randomly.

Pair Corralation between Karat Packaging and Leisure Fund

Considering the 90-day investment horizon Karat Packaging is expected to generate 1.74 times more return on investment than Leisure Fund. However, Karat Packaging is 1.74 times more volatile than Leisure Fund Class. It trades about -0.09 of its potential returns per unit of risk. Leisure Fund Class is currently generating about -0.28 per unit of risk. If you would invest  3,137  in Karat Packaging on October 4, 2024 and sell it today you would lose (111.00) from holding Karat Packaging or give up 3.54% of portfolio value over 90 days.

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

Karat Packaging  vs.  Leisure Fund Class

Karat Packaging

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Karat Packaging are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Karat Packaging unveiled solid returns over the last few months and may actually be approaching a breakup point.

Leisure Fund Class

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Leisure Fund Class are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Leisure Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Karat Packaging and Leisure Fund

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

The idea behind Karat Packaging and Leisure Fund Class 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.