Correlation Between Auto Trader and Tradeweb Markets
Can any of the company-specific risk be diversified away by investing in both Auto Trader and Tradeweb Markets 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 Auto Trader and Tradeweb Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Tradeweb Markets, you can compare the effects of market volatilities on Auto Trader and Tradeweb Markets 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 Auto Trader with a short position of Tradeweb Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Tradeweb Markets.
Diversification Opportunities for Auto Trader and Tradeweb Markets
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Auto and Tradeweb is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Tradeweb Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradeweb Markets and Auto Trader 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 Auto Trader Group are associated (or correlated) with Tradeweb Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradeweb Markets has no effect on the direction of Auto Trader i.e., Auto Trader and Tradeweb Markets go up and down completely randomly.
Pair Corralation between Auto Trader and Tradeweb Markets
Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the Tradeweb Markets. In addition to that, Auto Trader is 1.18 times more volatile than Tradeweb Markets. It trades about -0.13 of its total potential returns per unit of risk. Tradeweb Markets is currently generating about 0.09 per unit of volatility. If you would invest 12,300 in Tradeweb Markets on August 25, 2024 and sell it today you would earn a total of 400.00 from holding Tradeweb Markets or generate 3.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. Tradeweb Markets
Performance |
| Timeline |
| Auto Trader Group |
| Tradeweb Markets |
Auto Trader and Tradeweb Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Tradeweb Markets
The main advantage of trading using opposite Auto Trader and Tradeweb Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Tradeweb Markets 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 Tradeweb Markets will offset losses from the drop in Tradeweb Markets' long position.| Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc |
| Tradeweb Markets vs. Apple Inc | Tradeweb Markets vs. Apple Inc | Tradeweb Markets vs. Apple Inc | Tradeweb Markets vs. Apple Inc |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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