Correlation Between Auto Trader and Transportadora
Can any of the company-specific risk be diversified away by investing in both Auto Trader and Transportadora 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 Transportadora 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 Transportadora de Gas, you can compare the effects of market volatilities on Auto Trader and Transportadora 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 Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Transportadora.
Diversification Opportunities for Auto Trader and Transportadora
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Auto and Transportadora is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of Auto Trader i.e., Auto Trader and Transportadora go up and down completely randomly.
Pair Corralation between Auto Trader and Transportadora
Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the Transportadora. But the stock apears to be less risky and, when comparing its historical volatility, Auto Trader Group is 2.34 times less risky than Transportadora. The stock trades about -0.03 of its potential returns per unit of risk. The Transportadora de Gas is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,690 in Transportadora de Gas on August 29, 2024 and sell it today you would earn a total of 1,190 from holding Transportadora de Gas or generate 70.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Auto Trader Group vs. Transportadora de Gas
Performance |
| Timeline |
| Auto Trader Group |
| Transportadora de Gas |
Auto Trader and Transportadora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Transportadora
The main advantage of trading using opposite Auto Trader and Transportadora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Transportadora 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 Transportadora will offset losses from the drop in Transportadora's long position.| Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc |
| Transportadora vs. China Datang | Transportadora vs. Stewart Information Services | Transportadora vs. SOLSTAD OFFSHORE NK | Transportadora vs. EIDESVIK OFFSHORE NK |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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