Correlation Between Thrace Plastics and Karelia Tobacco

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

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

Diversification Opportunities for Thrace Plastics and Karelia Tobacco

0.02

Correlation Coefficient

Thrace Plastics  Karelia Tobacco

Significant diversification

The 3 months correlation between Thrace and Karelia is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Thrace Plastics Holding and Karelia Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karelia Tobacco and Thrace Plastics 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 Thrace Plastics Holding are associated (or correlated) with Karelia Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karelia Tobacco has no effect on the direction of Thrace Plastics i.e., Thrace Plastics and Karelia Tobacco go up and down completely randomly.

Pair Corralation between Thrace Plastics and Karelia Tobacco

Assuming the 90 days trading horizon Thrace Plastics Holding is expected to generate 1.05 times more return on investment than Karelia Tobacco. However, Thrace Plastics is 1.05 times more volatile than Karelia Tobacco. It trades about 0.06 of its potential returns per unit of risk. Karelia Tobacco is currently generating about -0.07 per unit of risk. If you would invest  392.00  in Thrace Plastics Holding on December 30, 2024 and sell it today you would earn a total of  22.00  from holding Thrace Plastics Holding or generate 5.61% return on investment over 90 days.

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

Thrace Plastics Holding  vs.  Karelia Tobacco

Thrace Plastics Holding

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thrace Plastics Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Thrace Plastics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Karelia Tobacco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Karelia Tobacco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Karelia Tobacco is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Thrace Plastics and Karelia Tobacco

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

The idea behind Thrace Plastics Holding and Karelia Tobacco 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.