Correlation Between Auto Trader and TEAM Plc
Can any of the company-specific risk be diversified away by investing in both Auto Trader and TEAM Plc 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 TEAM Plc 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 TEAM plc, you can compare the effects of market volatilities on Auto Trader and TEAM Plc 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 TEAM Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and TEAM Plc.
Diversification Opportunities for Auto Trader and TEAM Plc
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Auto and TEAM is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and TEAM plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TEAM 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 TEAM Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TEAM plc has no effect on the direction of Auto Trader i.e., Auto Trader and TEAM Plc go up and down completely randomly.
Pair Corralation between Auto Trader and TEAM Plc
Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the TEAM Plc. But the stock apears to be less risky and, when comparing its historical volatility, Auto Trader Group is 1.17 times less risky than TEAM Plc. The stock trades about -0.01 of its potential returns per unit of risk. The TEAM plc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,075 in TEAM plc on September 4, 2024 and sell it today you would earn a total of 75.00 from holding TEAM plc or generate 6.98% 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. TEAM plc
Performance |
| Timeline |
| Auto Trader Group |
| TEAM plc |
Auto Trader and TEAM Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and TEAM Plc
The main advantage of trading using opposite Auto Trader and TEAM Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, TEAM Plc 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 TEAM Plc will offset losses from the drop in TEAM Plc's long position.| Auto Trader vs. Rightmove PLC | Auto Trader vs. Bioventix | Auto Trader vs. VeriSign | Auto Trader vs. Games Workshop Group |
| TEAM Plc vs. Auto Trader Group | TEAM Plc vs. Ecclesiastical Insurance Office | TEAM Plc vs. Veolia Environnement VE | TEAM Plc vs. Ecofin Global Utilities |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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