Correlation Between Pacific Basin and Caravelle International

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

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

Diversification Opportunities for Pacific Basin and Caravelle International

-0.69

Correlation Coefficient

Pacific Basin  Caravelle International

Excellent diversification

The 3 months correlation between Pacific and Caravelle is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Basin Shipping and Caravelle International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caravelle International and Pacific Basin 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 Pacific Basin Shipping are associated (or correlated) with Caravelle International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caravelle International has no effect on the direction of Pacific Basin i.e., Pacific Basin and Caravelle International go up and down completely randomly.

Pair Corralation between Pacific Basin and Caravelle International

Assuming the 90 days horizon Pacific Basin Shipping is expected to under-perform the Caravelle International. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pacific Basin Shipping is 4.35 times less risky than Caravelle International. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Caravelle International Group is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  46.00  in Caravelle International Group on September 26, 2024 and sell it today you would earn a total of  207.00  from holding Caravelle International Group or generate 450.0% return on investment over 90 days.

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

Pacific Basin Shipping  vs.  Caravelle International Group

Pacific Basin Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Basin Shipping 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 fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Caravelle International

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caravelle International Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Caravelle International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacific Basin and Caravelle International

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

The idea behind Pacific Basin Shipping and Caravelle International Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.