Correlation Between O I and Karat Packaging

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

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

Diversification Opportunities for O I and Karat Packaging

0.58

Correlation Coefficient

O I  Karat Packaging

Very weak diversification

The 3 months correlation between O I and Karat is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding O I Glass and Karat Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karat Packaging and O I 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 O I Glass 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 O I i.e., O I and Karat Packaging go up and down completely randomly.

Pair Corralation between O I and Karat Packaging

Allowing for the 90-day total investment horizon O I Glass is expected to under-perform the Karat Packaging. In addition to that, O I is 1.32 times more volatile than Karat Packaging. It trades about -0.11 of its total potential returns per unit of risk. Karat Packaging is currently generating about -0.11 per unit of volatility. If you would invest  2,880  in Karat Packaging on January 31, 2024 and sell it today you would lose (136.00) from holding Karat Packaging or give up 4.72% of portfolio value over 90 days.

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

O I Glass  vs.  Karat Packaging

O I Glass

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in O I Glass are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, O I may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Karat Packaging

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Karat Packaging are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Karat Packaging unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with O I and Karat Packaging

The main advantage of trading using opposite O I and Karat Packaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if O I 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 O I Glass 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.