Correlation Between VTEX and Karooooo

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

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

Diversification Opportunities for VTEX and Karooooo

0.68

Correlation Coefficient

VTEX  Karooooo

Poor diversification

The 3 months correlation between VTEX and Karooooo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding VTEX and Karooooo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karooooo and VTEX 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 VTEX 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 VTEX i.e., VTEX and Karooooo go up and down completely randomly.

Pair Corralation between VTEX and Karooooo

Given the investment horizon of 90 days VTEX is expected to generate 1.48 times more return on investment than Karooooo. However, VTEX is 1.48 times more volatile than Karooooo. It trades about -0.04 of its potential returns per unit of risk. Karooooo is currently generating about -0.06 per unit of risk. If you would invest  568.00  in VTEX on December 20, 2024 and sell it today you would lose (74.00) from holding VTEX or give up 13.03% of portfolio value over 90 days.

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

VTEX  vs.  Karooooo

VTEX

Risk-Adjusted Performance

Very Weak

Over the last 90 days VTEX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Karooooo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Karooooo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with VTEX and Karooooo

The main advantage of trading using opposite VTEX and Karooooo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VTEX 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 VTEX 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.