Correlation Between Cars and Western Copper
Can any of the company-specific risk be diversified away by investing in both Cars and Western Copper 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 Western Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Western Copper and, you can compare the effects of market volatilities on Cars and Western Copper 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 Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Western Copper.
Diversification Opportunities for Cars and Western Copper
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Cars and Western is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Cars i.e., Cars and Western Copper go up and down completely randomly.
Pair Corralation between Cars and Western Copper
Assuming the 90 days horizon Cars Inc is expected to generate 0.69 times more return on investment than Western Copper. However, Cars Inc is 1.44 times less risky than Western Copper. It trades about 0.37 of its potential returns per unit of risk. Western Copper and is currently generating about 0.04 per unit of risk. If you would invest 1,460 in Cars Inc on August 31, 2024 and sell it today you would earn a total of 400.00 from holding Cars Inc or generate 27.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Cars Inc vs. Western Copper and
Performance |
| Timeline |
| Cars Inc |
| Western Copper |
Cars and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Western Copper
The main advantage of trading using opposite Cars and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper's long position.| Cars vs. SALESFORCE INC CDR | Cars vs. FAST RETAIL ADR | Cars vs. Auto Trader Group | Cars vs. SHIP HEALTHCARE HLDGINC |
| Western Copper vs. MTI WIRELESS EDGE | Western Copper vs. Playa Hotels Resorts | Western Copper vs. Playtech plc | Western Copper vs. INTERSHOP Communications Aktiengesellschaft |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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