Correlation Between Cars and Global Ship
Can any of the company-specific risk be diversified away by investing in both Cars and Global Ship 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 Global Ship into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Global Ship Lease, you can compare the effects of market volatilities on Cars and Global Ship 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 Global Ship. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Global Ship.
Diversification Opportunities for Cars and Global Ship
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cars and Global is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Global Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Ship Lease 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 Global Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Ship Lease has no effect on the direction of Cars i.e., Cars and Global Ship go up and down completely randomly.
Pair Corralation between Cars and Global Ship
Assuming the 90 days horizon Cars Inc is expected to generate 1.54 times more return on investment than Global Ship. However, Cars is 1.54 times more volatile than Global Ship Lease. It trades about 0.3 of its potential returns per unit of risk. Global Ship Lease is currently generating about -0.05 per unit of risk. If you would invest 1,430 in Cars Inc on August 24, 2024 and sell it today you would earn a total of 310.00 from holding Cars Inc or generate 21.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Cars Inc vs. Global Ship Lease
Performance |
| Timeline |
| Cars Inc |
| Global Ship Lease |
Cars and Global Ship Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Global Ship
The main advantage of trading using opposite Cars and Global Ship positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, Global Ship 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 Global Ship will offset losses from the drop in Global Ship's long position.| Cars vs. Superior Plus Corp | Cars vs. NMI Holdings | Cars vs. Origin Agritech | Cars vs. SIVERS SEMICONDUCTORS AB |
| Global Ship vs. Superior Plus Corp | Global Ship vs. NMI Holdings | Global Ship vs. Origin Agritech | Global Ship vs. SIVERS SEMICONDUCTORS AB |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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