Correlation Between PetMed Express and Caspian Services

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Can any of the company-specific risk be diversified away by investing in both PetMed Express and Caspian Services 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 PetMed Express and Caspian Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetMed Express and Caspian Services, you can compare the effects of market volatilities on PetMed Express and Caspian Services 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 PetMed Express with a short position of Caspian Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetMed Express and Caspian Services.

Diversification Opportunities for PetMed Express and Caspian Services

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between PetMed and Caspian is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding PetMed Express and Caspian Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caspian Services and PetMed Express 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 PetMed Express are associated (or correlated) with Caspian Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caspian Services has no effect on the direction of PetMed Express i.e., PetMed Express and Caspian Services go up and down completely randomly.

Pair Corralation between PetMed Express and Caspian Services

Given the investment horizon of 90 days PetMed Express is expected to generate 1.84 times less return on investment than Caspian Services. But when comparing it to its historical volatility, PetMed Express is 1.85 times less risky than Caspian Services. It trades about 0.12 of its potential returns per unit of risk. Caspian Services is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.21  in Caspian Services on September 22, 2024 and sell it today you would earn a total of  0.19  from holding Caspian Services or generate 90.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.46%
ValuesDaily Returns

PetMed Express  vs.  Caspian Services

 Performance 
       Timeline  
PetMed Express 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in PetMed Express are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, PetMed Express unveiled solid returns over the last few months and may actually be approaching a breakup point.
Caspian Services 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Caspian Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Caspian Services showed solid returns over the last few months and may actually be approaching a breakup point.

PetMed Express and Caspian Services Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PetMed Express and Caspian Services

The main advantage of trading using opposite PetMed Express and Caspian Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetMed Express position performs unexpectedly, Caspian Services 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 Caspian Services will offset losses from the drop in Caspian Services' long position.
The idea behind PetMed Express and Caspian Services 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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