Correlation Between Carlyle and 3i Group

Can any of the company-specific risk be diversified away by investing in both Carlyle and 3i Group 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 Carlyle and 3i Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carlyle Group and 3i Group PLC, you can compare the effects of market volatilities on Carlyle and 3i Group 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 Carlyle with a short position of 3i Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlyle and 3i Group.

Diversification Opportunities for Carlyle and 3i Group

0.19

Correlation Coefficient

Carlyle  3i Group

Average diversification

The 3 months correlation between Carlyle and TGOPY is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and 3i Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3i Group PLC and Carlyle 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 Carlyle Group are associated (or correlated) with 3i Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3i Group PLC has no effect on the direction of Carlyle i.e., Carlyle and 3i Group go up and down completely randomly.

Pair Corralation between Carlyle and 3i Group

Allowing for the 90-day total investment horizon Carlyle Group is expected to under-perform the 3i Group. In addition to that, Carlyle is 2.73 times more volatile than 3i Group PLC. It trades about -0.26 of its total potential returns per unit of risk. 3i Group PLC is currently generating about 0.22 per unit of volatility. If you would invest  1,775  in 3i Group PLC on February 5, 2024 and sell it today you would earn a total of  75.00  from holding 3i Group PLC or generate 4.23% return on investment over 90 days.

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

Carlyle Group  vs.  3i Group PLC

Carlyle Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Carlyle is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

3i Group PLC

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 3i Group PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, 3i Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlyle and 3i Group

The main advantage of trading using opposite Carlyle and 3i Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlyle position performs unexpectedly, 3i Group 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 3i Group will offset losses from the drop in 3i Group's long position.

The idea behind Carlyle Group and 3i Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.