Correlation Between Auto Trader and Capital Drilling
Can any of the company-specific risk be diversified away by investing in both Auto Trader and Capital Drilling 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 Capital Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Capital Drilling, you can compare the effects of market volatilities on Auto Trader and Capital Drilling 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 Capital Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Capital Drilling.
Diversification Opportunities for Auto Trader and Capital Drilling
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Auto and Capital is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Group are associated (or correlated) with Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Auto Trader i.e., Auto Trader and Capital Drilling go up and down completely randomly.
Pair Corralation between Auto Trader and Capital Drilling
Assuming the 90 days trading horizon Auto Trader Group is expected to generate 0.74 times more return on investment than Capital Drilling. However, Auto Trader Group is 1.35 times less risky than Capital Drilling. It trades about 0.04 of its potential returns per unit of risk. Capital Drilling is currently generating about 0.01 per unit of risk. If you would invest 71,167 in Auto Trader Group on September 20, 2024 and sell it today you would earn a total of 9,013 from holding Auto Trader Group or generate 12.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. Capital Drilling
Performance |
| Timeline |
| Auto Trader Group |
| Capital Drilling |
Auto Trader and Capital Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Capital Drilling
The main advantage of trading using opposite Auto Trader and Capital Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Capital Drilling 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 Capital Drilling will offset losses from the drop in Capital Drilling's long position.| Auto Trader vs. Berkshire Hathaway | Auto Trader vs. Hyundai Motor | Auto Trader vs. Samsung Electronics Co | Auto Trader vs. Samsung Electronics Co |
| Capital Drilling vs. Indutrade AB | Capital Drilling vs. Auto Trader Group | Capital Drilling vs. Evolution Gaming Group | Capital Drilling vs. Qurate Retail Series |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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