Correlation Between Sapiens International and Carbon Revolution

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

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

Diversification Opportunities for Sapiens International and Carbon Revolution

-0.13

Correlation Coefficient

Sapiens International  Carbon Revolution

Good diversification

The 3 months correlation between Sapiens and Carbon is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sapiens International and Carbon Revolution Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carbon Revolution Public and Sapiens International 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 Sapiens International are associated (or correlated) with Carbon Revolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carbon Revolution Public has no effect on the direction of Sapiens International i.e., Sapiens International and Carbon Revolution go up and down completely randomly.

Pair Corralation between Sapiens International and Carbon Revolution

Given the investment horizon of 90 days Sapiens International is expected to under-perform the Carbon Revolution. But the stock apears to be less risky and, when comparing its historical volatility, Sapiens International is 26.29 times less risky than Carbon Revolution. The stock trades about -0.39 of its potential returns per unit of risk. The Carbon Revolution Public is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  202.00  in Carbon Revolution Public on October 12, 2024 and sell it today you would earn a total of  319.00  from holding Carbon Revolution Public or generate 157.92% return on investment over 90 days.

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

Sapiens International  vs.  Carbon Revolution Public

Sapiens International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Carbon Revolution Public

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sapiens International and Carbon Revolution

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

The idea behind Sapiens International and Carbon Revolution Public 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.