Correlation Between AUTO TRADER and Canadian Utilities
Can any of the company-specific risk be diversified away by investing in both AUTO TRADER and Canadian Utilities 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 Canadian Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AUTO TRADER ADR and Canadian Utilities Limited, you can compare the effects of market volatilities on AUTO TRADER and Canadian Utilities 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 Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUTO TRADER and Canadian Utilities.
Diversification Opportunities for AUTO TRADER and Canadian Utilities
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between AUTO and Canadian is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding AUTO TRADER ADR and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 ADR are associated (or correlated) with Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of AUTO TRADER i.e., AUTO TRADER and Canadian Utilities go up and down completely randomly.
Pair Corralation between AUTO TRADER and Canadian Utilities
Assuming the 90 days trading horizon AUTO TRADER ADR is expected to under-perform the Canadian Utilities. In addition to that, AUTO TRADER is 1.52 times more volatile than Canadian Utilities Limited. It trades about -0.03 of its total potential returns per unit of risk. Canadian Utilities Limited is currently generating about 0.18 per unit of volatility. If you would invest 2,279 in Canadian Utilities Limited on September 1, 2024 and sell it today you would earn a total of 120.00 from holding Canadian Utilities Limited or generate 5.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AUTO TRADER ADR vs. Canadian Utilities Limited
Performance |
| Timeline |
| AUTO TRADER ADR |
| Canadian Utilities |
AUTO TRADER and Canadian Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AUTO TRADER and Canadian Utilities
The main advantage of trading using opposite AUTO TRADER and Canadian Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUTO TRADER position performs unexpectedly, Canadian Utilities 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 Canadian Utilities will offset losses from the drop in Canadian Utilities' long position.| AUTO TRADER vs. Alphabet Class A | AUTO TRADER vs. Alphabet Class A | AUTO TRADER vs. Meta Platforms | AUTO TRADER vs. Tencent Holdings |
| Canadian Utilities vs. ATRESMEDIA | Canadian Utilities vs. Lamar Advertising | Canadian Utilities vs. CARSALESCOM | Canadian Utilities vs. PLAYTIKA HOLDING DL 01 |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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