Correlation Between Cars and Marine Products
Can any of the company-specific risk be diversified away by investing in both Cars and Marine Products 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 Cars and Marine Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Marine Products, you can compare the effects of market volatilities on Cars and Marine Products 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 Cars with a short position of Marine Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Marine Products.
Diversification Opportunities for Cars and Marine Products
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cars and Marine is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products and Cars 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 Cars Inc are associated (or correlated) with Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of Cars i.e., Cars and Marine Products go up and down completely randomly.
Pair Corralation between Cars and Marine Products
Given the investment horizon of 90 days Cars Inc is expected to generate 1.36 times more return on investment than Marine Products. However, Cars is 1.36 times more volatile than Marine Products. It trades about 0.41 of its potential returns per unit of risk. Marine Products is currently generating about 0.13 per unit of risk. If you would invest 1,600 in Cars Inc on August 31, 2024 and sell it today you would earn a total of 370.00 from holding Cars Inc or generate 23.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. Marine Products
Performance |
| Timeline |
| Cars Inc |
| Marine Products |
Cars and Marine Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Marine Products
The main advantage of trading using opposite Cars and Marine Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, Marine Products 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 Marine Products will offset losses from the drop in Marine Products' long position.The idea behind Cars Inc and Marine Products 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.| Marine Products vs. Vision Marine Technologies | Marine Products vs. EZGO Technologies | Marine Products vs. LCI Industries | Marine Products vs. Curtiss Motorcycles |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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