Correlation Between Cars and CENTERPOINT
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By analyzing existing cross correlation between Cars Inc and CENTERPOINT ENERGY INC, you can compare the effects of market volatilities on Cars and CENTERPOINT 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 CENTERPOINT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and CENTERPOINT.
Diversification Opportunities for Cars and CENTERPOINT
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cars and CENTERPOINT is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and CENTERPOINT ENERGY INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CENTERPOINT ENERGY INC 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 CENTERPOINT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CENTERPOINT ENERGY INC has no effect on the direction of Cars i.e., Cars and CENTERPOINT go up and down completely randomly.
Pair Corralation between Cars and CENTERPOINT
Given the investment horizon of 90 days Cars is expected to generate 115.85 times less return on investment than CENTERPOINT. But when comparing it to its historical volatility, Cars Inc is 37.4 times less risky than CENTERPOINT. It trades about 0.02 of its potential returns per unit of risk. CENTERPOINT ENERGY INC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 9,536 in CENTERPOINT ENERGY INC on September 4, 2024 and sell it today you would lose (38.00) from holding CENTERPOINT ENERGY INC or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 79.36% |
| Values | Daily Returns |
Cars Inc vs. CENTERPOINT ENERGY INC
Performance |
| Timeline |
| Cars Inc |
| CENTERPOINT ENERGY INC |
Cars and CENTERPOINT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and CENTERPOINT
The main advantage of trading using opposite Cars and CENTERPOINT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, CENTERPOINT 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 CENTERPOINT will offset losses from the drop in CENTERPOINT's long position.The idea behind Cars Inc and CENTERPOINT ENERGY INC 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.| CENTERPOINT vs. Dalata Hotel Group | CENTERPOINT vs. Biglari Holdings | CENTERPOINT vs. ArcelorMittal SA ADR | CENTERPOINT vs. Accel Entertainment |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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