Correlation Between Core Molding and Karat Packaging

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

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

Diversification Opportunities for Core Molding and Karat Packaging

0.1

Correlation Coefficient

Core Molding  Karat Packaging

Average diversification

The 3 months correlation between Core and Karat is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Core Molding Technologies and Karat Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karat Packaging and Core Molding 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 Core Molding Technologies are associated (or correlated) with Karat Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karat Packaging has no effect on the direction of Core Molding i.e., Core Molding and Karat Packaging go up and down completely randomly.

Pair Corralation between Core Molding and Karat Packaging

Considering the 90-day investment horizon Core Molding Technologies is expected to under-perform the Karat Packaging. In addition to that, Core Molding is 1.21 times more volatile than Karat Packaging. It trades about -0.05 of its total potential returns per unit of risk. Karat Packaging is currently generating about -0.04 per unit of volatility. If you would invest  2,906  in Karat Packaging on March 12, 2024 and sell it today you would lose (214.00) from holding Karat Packaging or give up 7.36% of portfolio value over 90 days.

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

Core Molding Technologies  vs.  Karat Packaging

Core Molding Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Core Molding Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Karat Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Core Molding and Karat Packaging

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

The idea behind Core Molding Technologies and Karat Packaging 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..