Correlation Between Cars and SYSTEMAIR
Can any of the company-specific risk be diversified away by investing in both Cars and SYSTEMAIR 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 SYSTEMAIR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and SYSTEMAIR AB, you can compare the effects of market volatilities on Cars and SYSTEMAIR 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 SYSTEMAIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and SYSTEMAIR.
Diversification Opportunities for Cars and SYSTEMAIR
Very weak diversification
The 3 months correlation between Cars and SYSTEMAIR is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and SYSTEMAIR AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SYSTEMAIR AB 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 SYSTEMAIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SYSTEMAIR AB has no effect on the direction of Cars i.e., Cars and SYSTEMAIR go up and down completely randomly.
Pair Corralation between Cars and SYSTEMAIR
Assuming the 90 days horizon Cars Inc is expected to under-perform the SYSTEMAIR. But the stock apears to be less risky and, when comparing its historical volatility, Cars Inc is 1.0 times less risky than SYSTEMAIR. The stock trades about -0.03 of its potential returns per unit of risk. The SYSTEMAIR AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 538.00 in SYSTEMAIR AB on December 12, 2024 and sell it today you would earn a total of 201.00 from holding SYSTEMAIR AB or generate 37.36% 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. SYSTEMAIR AB
Performance |
| Timeline |
| Cars Inc |
| SYSTEMAIR AB |
Cars and SYSTEMAIR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and SYSTEMAIR
The main advantage of trading using opposite Cars and SYSTEMAIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, SYSTEMAIR 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 SYSTEMAIR will offset losses from the drop in SYSTEMAIR's long position.| Cars vs. Salesforce | ||
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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