Correlation Between Cars and GOLD ROAD

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Can any of the company-specific risk be diversified away by investing in both Cars and GOLD ROAD 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 GOLD ROAD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and GOLD ROAD RES, you can compare the effects of market volatilities on Cars and GOLD ROAD 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 GOLD ROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and GOLD ROAD.

Diversification Opportunities for Cars and GOLD ROAD

0.42
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Cars and GOLD is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and GOLD ROAD RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLD ROAD RES 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 GOLD ROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLD ROAD RES has no effect on the direction of Cars i.e., Cars and GOLD ROAD go up and down completely randomly.

Pair Corralation between Cars and GOLD ROAD

Assuming the 90 days horizon Cars Inc is expected to generate 0.97 times more return on investment than GOLD ROAD. However, Cars Inc is 1.03 times less risky than GOLD ROAD. It trades about 0.03 of its potential returns per unit of risk. GOLD ROAD RES is currently generating about 0.03 per unit of risk. If you would invest  1,270  in Cars Inc on September 23, 2024 and sell it today you would earn a total of  390.00  from holding Cars Inc or generate 30.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Cars Inc  vs.  GOLD ROAD RES

 Performance 
       Timeline  
Cars Inc 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Cars is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
GOLD ROAD RES 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in GOLD ROAD RES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cars and GOLD ROAD Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cars and GOLD ROAD

The main advantage of trading using opposite Cars and GOLD ROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, GOLD ROAD 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 GOLD ROAD will offset losses from the drop in GOLD ROAD's long position.
The idea behind Cars Inc and GOLD ROAD RES 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.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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