Correlation Between Karat Packaging and Birkenstock Holding

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

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

Diversification Opportunities for Karat Packaging and Birkenstock Holding

0.28

Correlation Coefficient

Karat Packaging  Birkenstock Holding

Modest diversification

The 3 months correlation between Karat and Birkenstock is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Karat Packaging and Birkenstock Holding plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birkenstock Holding plc and Karat Packaging 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 Karat Packaging are associated (or correlated) with Birkenstock Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birkenstock Holding plc has no effect on the direction of Karat Packaging i.e., Karat Packaging and Birkenstock Holding go up and down completely randomly.

Pair Corralation between Karat Packaging and Birkenstock Holding

Considering the 90-day investment horizon Karat Packaging is expected to generate 1.25 times less return on investment than Birkenstock Holding. In addition to that, Karat Packaging is 1.06 times more volatile than Birkenstock Holding plc. It trades about 0.05 of its total potential returns per unit of risk. Birkenstock Holding plc is currently generating about 0.07 per unit of volatility. If you would invest  4,600  in Birkenstock Holding plc on March 13, 2024 and sell it today you would earn a total of  1,277  from holding Birkenstock Holding plc or generate 27.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	33.94%
Values	Daily Returns

Karat Packaging  vs.  Birkenstock Holding plc

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.

Birkenstock Holding plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Birkenstock Holding plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Birkenstock Holding disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Karat Packaging and Birkenstock Holding

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

The idea behind Karat Packaging and Birkenstock Holding plc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.