Correlation Between Auto Trader and Gamma Communications
Can any of the company-specific risk be diversified away by investing in both Auto Trader and Gamma Communications 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 Gamma Communications 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 Gamma Communications PLC, you can compare the effects of market volatilities on Auto Trader and Gamma Communications 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 Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Gamma Communications.
Diversification Opportunities for Auto Trader and Gamma Communications
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Auto and Gamma is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Gamma Communications PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications PLC 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications PLC has no effect on the direction of Auto Trader i.e., Auto Trader and Gamma Communications go up and down completely randomly.
Pair Corralation between Auto Trader and Gamma Communications
Assuming the 90 days trading horizon Auto Trader Group is expected to generate 0.65 times more return on investment than Gamma Communications. However, Auto Trader Group is 1.54 times less risky than Gamma Communications. It trades about 0.1 of its potential returns per unit of risk. Gamma Communications PLC is currently generating about -0.61 per unit of risk. If you would invest 78,074 in Auto Trader Group on October 22, 2024 and sell it today you would earn a total of 1,286 from holding Auto Trader Group or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. Gamma Communications PLC
Performance |
| Timeline |
| Auto Trader Group |
| Gamma Communications PLC |
Auto Trader and Gamma Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Gamma Communications
The main advantage of trading using opposite Auto Trader and Gamma Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Gamma Communications 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 Gamma Communications will offset losses from the drop in Gamma Communications' long position.| Auto Trader vs. LPKF Laser Electronics | Auto Trader vs. Zoom Video Communications | Auto Trader vs. Costco Wholesale Corp | Auto Trader vs. Samsung Electronics Co |
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 Stocks Directory module to find actively traded stocks across global markets.
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