Correlation Between AutoCanada and Vertu Motors
Can any of the company-specific risk be diversified away by investing in both AutoCanada and Vertu Motors 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 AutoCanada and Vertu Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoCanada and Vertu Motors Plc, you can compare the effects of market volatilities on AutoCanada and Vertu Motors 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 AutoCanada with a short position of Vertu Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoCanada and Vertu Motors.
Diversification Opportunities for AutoCanada and Vertu Motors
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AutoCanada and Vertu is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding AutoCanada and Vertu Motors Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertu Motors Plc and AutoCanada 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 AutoCanada are associated (or correlated) with Vertu Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertu Motors Plc has no effect on the direction of AutoCanada i.e., AutoCanada and Vertu Motors go up and down completely randomly.
Pair Corralation between AutoCanada and Vertu Motors
Assuming the 90 days horizon AutoCanada is expected to generate 52.37 times less return on investment than Vertu Motors. But when comparing it to its historical volatility, AutoCanada is 1.07 times less risky than Vertu Motors. It trades about 0.0 of its potential returns per unit of risk. Vertu Motors Plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 86.00 in Vertu Motors Plc on September 12, 2024 and sell it today you would earn a total of 7.00 from holding Vertu Motors Plc or generate 8.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 11.93% |
| Values | Daily Returns |
AutoCanada vs. Vertu Motors Plc
Performance |
| Timeline |
| AutoCanada |
| Vertu Motors Plc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
AutoCanada and Vertu Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoCanada and Vertu Motors
The main advantage of trading using opposite AutoCanada and Vertu Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoCanada position performs unexpectedly, Vertu Motors 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 Vertu Motors will offset losses from the drop in Vertu Motors' long position.| AutoCanada vs. Arhaus Inc | AutoCanada vs. Floor Decor Holdings | AutoCanada vs. Live Ventures | AutoCanada vs. ATT Inc |
| Vertu Motors vs. AutoCanada | Vertu Motors vs. Consumer Automotive Finance | Vertu Motors vs. Kaixin Auto Holdings | Vertu Motors vs. Vroom 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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