Correlation Between Tradeweb Markets and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Tradeweb Markets and Auto Trader 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 Tradeweb Markets and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tradeweb Markets and Auto Trader Group, you can compare the effects of market volatilities on Tradeweb Markets and Auto Trader 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 Tradeweb Markets with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tradeweb Markets and Auto Trader.
Diversification Opportunities for Tradeweb Markets and Auto Trader
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tradeweb and Auto is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Tradeweb Markets and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Tradeweb Markets 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 Tradeweb Markets are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Tradeweb Markets i.e., Tradeweb Markets and Auto Trader go up and down completely randomly.
Pair Corralation between Tradeweb Markets and Auto Trader
Assuming the 90 days horizon Tradeweb Markets is expected to generate 0.85 times more return on investment than Auto Trader. However, Tradeweb Markets is 1.18 times less risky than Auto Trader. It trades about 0.09 of its potential returns per unit of risk. Auto Trader Group is currently generating about -0.13 per unit of risk. 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 |
Tradeweb Markets vs. Auto Trader Group
Performance |
| Timeline |
| Tradeweb Markets |
| Auto Trader Group |
Tradeweb Markets and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tradeweb Markets and Auto Trader
The main advantage of trading using opposite Tradeweb Markets and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tradeweb Markets position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Tradeweb Markets vs. Apple Inc | Tradeweb Markets vs. Apple Inc | Tradeweb Markets vs. Apple Inc | Tradeweb Markets vs. Apple Inc |
| Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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