Correlation Between AUTO TRADER and Indutrade
Can any of the company-specific risk be diversified away by investing in both AUTO TRADER and Indutrade 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 Indutrade 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 Indutrade AB, you can compare the effects of market volatilities on AUTO TRADER and Indutrade 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 Indutrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUTO TRADER and Indutrade.
Diversification Opportunities for AUTO TRADER and Indutrade
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AUTO and Indutrade is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding AUTO TRADER ADR and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB 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 Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of AUTO TRADER i.e., AUTO TRADER and Indutrade go up and down completely randomly.
Pair Corralation between AUTO TRADER and Indutrade
Assuming the 90 days trading horizon AUTO TRADER is expected to generate 12.69 times less return on investment than Indutrade. But when comparing it to its historical volatility, AUTO TRADER ADR is 1.21 times less risky than Indutrade. It trades about 0.03 of its potential returns per unit of risk. Indutrade AB is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 2,380 in Indutrade AB on October 23, 2024 and sell it today you would earn a total of 178.00 from holding Indutrade AB or generate 7.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AUTO TRADER ADR vs. Indutrade AB
Performance |
| Timeline |
| AUTO TRADER ADR |
| Indutrade AB |
AUTO TRADER and Indutrade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AUTO TRADER and Indutrade
The main advantage of trading using opposite AUTO TRADER and Indutrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUTO TRADER position performs unexpectedly, Indutrade 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 Indutrade will offset losses from the drop in Indutrade's long position.| AUTO TRADER vs. Hanison Construction Holdings | AUTO TRADER vs. Australian Agricultural | AUTO TRADER vs. GRIFFIN MINING LTD | AUTO TRADER vs. Dairy Farm International |
| Indutrade vs. PLAYMATES TOYS | Indutrade vs. Gaming and Leisure | Indutrade vs. TERADATA | Indutrade vs. Hyrican Informationssysteme Aktiengesellschaft |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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