Correlation Between 3i Group and Carlyle

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

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

Diversification Opportunities for 3i Group and Carlyle

0.26

Correlation Coefficient

3i Group  Carlyle

Modest diversification

The 3 months correlation between TGOPF and Carlyle is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding 3i Group plc and Carlyle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Group and 3i Group 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 3i Group plc 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 3i Group i.e., 3i Group and Carlyle go up and down completely randomly.

Pair Corralation between 3i Group and Carlyle

Assuming the 90 days horizon 3i Group plc is expected to generate 0.96 times more return on investment than Carlyle. However, 3i Group plc is 1.04 times less risky than Carlyle. It trades about 0.13 of its potential returns per unit of risk. Carlyle Group is currently generating about -0.14 per unit of risk. If you would invest  3,263  in 3i Group plc on February 5, 2024 and sell it today you would earn a total of  321.00  from holding 3i Group plc or generate 9.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

3i Group plc  vs.  Carlyle Group

3i Group plc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 3i Group plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, 3i Group reported solid returns over the last few months and may actually be approaching a breakup point.

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with 3i Group and Carlyle

The main advantage of trading using opposite 3i Group and Carlyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3i Group 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 3i Group plc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.