Correlation Between Cars and CHINA TONTINE
Can any of the company-specific risk be diversified away by investing in both Cars and CHINA TONTINE 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 CHINA TONTINE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and CHINA TONTINE WINES, you can compare the effects of market volatilities on Cars and CHINA TONTINE 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 CHINA TONTINE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and CHINA TONTINE.
Diversification Opportunities for Cars and CHINA TONTINE
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cars and CHINA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and CHINA TONTINE WINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA TONTINE WINES 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 CHINA TONTINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA TONTINE WINES has no effect on the direction of Cars i.e., Cars and CHINA TONTINE go up and down completely randomly.
Pair Corralation between Cars and CHINA TONTINE
Assuming the 90 days horizon Cars is expected to generate 21.79 times less return on investment than CHINA TONTINE. But when comparing it to its historical volatility, Cars Inc is 14.23 times less risky than CHINA TONTINE. It trades about 0.03 of its potential returns per unit of risk. CHINA TONTINE WINES is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 0.70 in CHINA TONTINE WINES on September 28, 2024 and sell it today you would earn a total of 6.30 from holding CHINA TONTINE WINES or generate 900.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. CHINA TONTINE WINES
Performance |
| Timeline |
| Cars Inc |
| CHINA TONTINE WINES |
Cars and CHINA TONTINE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and CHINA TONTINE
The main advantage of trading using opposite Cars and CHINA TONTINE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, CHINA TONTINE 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 CHINA TONTINE will offset losses from the drop in CHINA TONTINE's long position.The idea behind Cars Inc and CHINA TONTINE WINES 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.| CHINA TONTINE vs. Diageo plc | CHINA TONTINE vs. Pernod Ricard SA | CHINA TONTINE vs. Hawesko Holding AG | CHINA TONTINE vs. ANDREW PELLER LTD |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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