Correlation Between Auto Trader and Gap
Can any of the company-specific risk be diversified away by investing in both Auto Trader and Gap 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 Gap 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 The Gap, you can compare the effects of market volatilities on Auto Trader and Gap 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 Gap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Gap.
Diversification Opportunities for Auto Trader and Gap
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Auto and Gap is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and The Gap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap 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 Gap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap has no effect on the direction of Auto Trader i.e., Auto Trader and Gap go up and down completely randomly.
Pair Corralation between Auto Trader and Gap
Assuming the 90 days trading horizon Auto Trader is expected to generate 3.03 times less return on investment than Gap. But when comparing it to its historical volatility, Auto Trader Group is 2.28 times less risky than Gap. It trades about 0.07 of its potential returns per unit of risk. The Gap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 832.00 in The Gap on September 2, 2024 and sell it today you would earn a total of 1,442 from holding The Gap or generate 173.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. The Gap
Performance |
| Timeline |
| Auto Trader Group |
| Gap |
Auto Trader and Gap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Gap
The main advantage of trading using opposite Auto Trader and Gap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Gap 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 Gap will offset losses from the drop in Gap's long position.| Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc |
| Gap vs. Universal Insurance Holdings | Gap vs. QBE Insurance Group | Gap vs. United Insurance Holdings | Gap vs. Khiron Life Sciences |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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