Correlation Between Karat Packaging and EA Series

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

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

Diversification Opportunities for Karat Packaging and EA Series

0.33

Correlation Coefficient

Karat Packaging  EA Series

Weak diversification

The 3 months correlation between Karat and SHOC is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Karat Packaging and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust 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 EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Karat Packaging i.e., Karat Packaging and EA Series go up and down completely randomly.

Pair Corralation between Karat Packaging and EA Series

Considering the 90-day investment horizon Karat Packaging is expected to generate 0.86 times more return on investment than EA Series. However, Karat Packaging is 1.17 times less risky than EA Series. It trades about 0.18 of its potential returns per unit of risk. EA Series Trust is currently generating about -0.02 per unit of risk. If you would invest  2,499  in Karat Packaging on August 30, 2024 and sell it today you would earn a total of  547.00  from holding Karat Packaging or generate 21.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Karat Packaging  vs.  EA Series Trust

Karat Packaging

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Karat Packaging are ranked lower than 14 (%) 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.

EA Series Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EA Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, EA Series is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Karat Packaging and EA Series

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

The idea behind Karat Packaging and EA Series Trust 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.