Correlation Between InPlay Oil and Auto Trader
Can any of the company-specific risk be diversified away by investing in both InPlay Oil 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 InPlay Oil and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InPlay Oil Corp and Auto Trader Group, you can compare the effects of market volatilities on InPlay Oil 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 InPlay Oil with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of InPlay Oil and Auto Trader.
Diversification Opportunities for InPlay Oil and Auto Trader
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between InPlay and Auto is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp 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 InPlay Oil 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 InPlay Oil Corp 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 InPlay Oil i.e., InPlay Oil and Auto Trader go up and down completely randomly.
Pair Corralation between InPlay Oil and Auto Trader
Assuming the 90 days trading horizon InPlay Oil Corp is expected to under-perform the Auto Trader. In addition to that, InPlay Oil is 1.59 times more volatile than Auto Trader Group. It trades about -0.31 of its total potential returns per unit of risk. Auto Trader Group is currently generating about 0.14 per unit of volatility. If you would invest 960.00 in Auto Trader Group on September 19, 2024 and sell it today you would earn a total of 30.00 from holding Auto Trader Group or generate 3.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
InPlay Oil Corp vs. Auto Trader Group
Performance |
| Timeline |
| InPlay Oil Corp |
| Auto Trader Group |
InPlay Oil and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InPlay Oil and Auto Trader
The main advantage of trading using opposite InPlay Oil and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InPlay Oil 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.The idea behind InPlay Oil Corp and Auto Trader Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Auto Trader vs. GungHo Online Entertainment | Auto Trader vs. SCANSOURCE | Auto Trader vs. YATRA ONLINE DL 0001 | Auto Trader vs. PPHE HOTEL GROUP |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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