Correlation Between Regional Management and Carlyle

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

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

Diversification Opportunities for Regional Management and Carlyle

0.9

Correlation Coefficient

Regional Management  Carlyle

Almost no diversification

The 3 months correlation between Regional and Carlyle is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management Corp and Carlyle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Group and Regional Management 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 Regional Management Corp are associated (or correlated) with Carlyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlyle Group has no effect on the direction of Regional Management i.e., Regional Management and Carlyle go up and down completely randomly.

Pair Corralation between Regional Management and Carlyle

Allowing for the 90-day total investment horizon Regional Management Corp is expected to generate 0.77 times more return on investment than Carlyle. However, Regional Management Corp is 1.3 times less risky than Carlyle. It trades about -0.04 of its potential returns per unit of risk. Carlyle Group is currently generating about -0.05 per unit of risk. If you would invest  3,362  in Regional Management Corp on January 3, 2025 and sell it today you would lose (225.00) from holding Regional Management Corp or give up 6.69% of portfolio value over 90 days.

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

Regional Management Corp  vs.  Carlyle Group

Regional Management Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Regional Management is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Carlyle Group

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Regional Management and Carlyle

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

The idea behind Regional Management Corp and Carlyle Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.