Correlation Between Cars and YAOKO
Can any of the company-specific risk be diversified away by investing in both Cars and YAOKO 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 YAOKO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and YAOKO LTD, you can compare the effects of market volatilities on Cars and YAOKO 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 YAOKO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and YAOKO.
Diversification Opportunities for Cars and YAOKO
Good diversification
The 3 months correlation between Cars and YAOKO is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and YAOKO LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YAOKO LTD 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 YAOKO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YAOKO LTD has no effect on the direction of Cars i.e., Cars and YAOKO go up and down completely randomly.
Pair Corralation between Cars and YAOKO
Assuming the 90 days horizon Cars Inc is expected to generate 2.2 times more return on investment than YAOKO. However, Cars is 2.2 times more volatile than YAOKO LTD. It trades about 0.37 of its potential returns per unit of risk. YAOKO LTD is currently generating about 0.14 per unit of risk. If you would invest 1,460 in Cars Inc on September 1, 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 Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Cars Inc vs. YAOKO LTD
Performance |
| Timeline |
| Cars Inc |
| YAOKO LTD |
Cars and YAOKO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and YAOKO
The main advantage of trading using opposite Cars and YAOKO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, YAOKO 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 YAOKO will offset losses from the drop in YAOKO's long position.| Cars vs. Eastman Chemical | Cars vs. GRIFFIN MINING LTD | Cars vs. Shin Etsu Chemical Co | Cars vs. KINGBOARD CHEMICAL |
| YAOKO vs. Zijin Mining Group | YAOKO vs. GRIFFIN MINING LTD | YAOKO vs. Geely Automobile Holdings | YAOKO vs. Cars 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 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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