Correlation Between Carters and Standard

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

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

Diversification Opportunities for Carters and Standard

-0.17

Correlation Coefficient

Carters  Standard

Good diversification

The 3 months correlation between Carters and Standard is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Standard Motor Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Motor Products and Carters 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 Carters are associated (or correlated) with Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Motor Products has no effect on the direction of Carters i.e., Carters and Standard go up and down completely randomly.

Pair Corralation between Carters and Standard

Considering the 90-day investment horizon Carters is expected to under-perform the Standard. In addition to that, Carters is 1.53 times more volatile than Standard Motor Products. It trades about 0.0 of its total potential returns per unit of risk. Standard Motor Products is currently generating about 0.21 per unit of volatility. If you would invest  3,048  in Standard Motor Products on June 28, 2025 and sell it today you would earn a total of  1,064  from holding Standard Motor Products or generate 34.91% return on investment over 90 days.

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

Carters  vs.  Standard Motor Products

Carters

Risk-Adjusted Performance

Weakest

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Carters is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Standard Motor Products

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Motor Products are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Standard reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carters and Standard

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

The idea behind Carters and Standard Motor Products 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.