Correlation Between Cars and NEW MILLENNIUM
Can any of the company-specific risk be diversified away by investing in both Cars and NEW MILLENNIUM 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 NEW MILLENNIUM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and NEW MILLENNIUM IRON, you can compare the effects of market volatilities on Cars and NEW MILLENNIUM 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 NEW MILLENNIUM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and NEW MILLENNIUM.
Diversification Opportunities for Cars and NEW MILLENNIUM
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cars and NEW is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and NEW MILLENNIUM IRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW MILLENNIUM IRON 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 NEW MILLENNIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW MILLENNIUM IRON has no effect on the direction of Cars i.e., Cars and NEW MILLENNIUM go up and down completely randomly.
Pair Corralation between Cars and NEW MILLENNIUM
Assuming the 90 days horizon Cars Inc is expected to generate 1.25 times more return on investment than NEW MILLENNIUM. However, Cars is 1.25 times more volatile than NEW MILLENNIUM IRON. It trades about 0.16 of its potential returns per unit of risk. NEW MILLENNIUM IRON is currently generating about -0.19 per unit of risk. If you would invest 1,650 in Cars Inc on November 6, 2024 and sell it today you would earn a total of 130.00 from holding Cars Inc or generate 7.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. NEW MILLENNIUM IRON
Performance |
| Timeline |
| Cars Inc |
| NEW MILLENNIUM IRON |
Cars and NEW MILLENNIUM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and NEW MILLENNIUM
The main advantage of trading using opposite Cars and NEW MILLENNIUM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, NEW MILLENNIUM 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 NEW MILLENNIUM will offset losses from the drop in NEW MILLENNIUM's long position.The idea behind Cars Inc and NEW MILLENNIUM IRON 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.| NEW MILLENNIUM vs. Apple Inc | NEW MILLENNIUM vs. Apple Inc | NEW MILLENNIUM vs. Apple Inc | NEW MILLENNIUM vs. Apple Inc |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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