Correlation Between Meridianlink and Karooooo

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

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

Diversification Opportunities for Meridianlink and Karooooo

-0.45

Correlation Coefficient

Meridianlink  Karooooo

Very good diversification

The 3 months correlation between Meridianlink and Karooooo is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Meridianlink and Karooooo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karooooo and Meridianlink 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 Meridianlink are associated (or correlated) with Karooooo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karooooo has no effect on the direction of Meridianlink i.e., Meridianlink and Karooooo go up and down completely randomly.

Pair Corralation between Meridianlink and Karooooo

Given the investment horizon of 90 days Meridianlink is expected to under-perform the Karooooo. But the stock apears to be less risky and, when comparing its historical volatility, Meridianlink is 2.36 times less risky than Karooooo. The stock trades about -0.27 of its potential returns per unit of risk. The Karooooo is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,480  in Karooooo on November 28, 2024 and sell it today you would earn a total of  33.00  from holding Karooooo or generate 0.74% return on investment over 90 days.

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

Meridianlink  vs.  Karooooo

Meridianlink

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meridianlink has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Karooooo

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Karooooo are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Karooooo is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Meridianlink and Karooooo

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

The idea behind Meridianlink and Karooooo 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.