Correlation Between Cars and Lion One
Can any of the company-specific risk be diversified away by investing in both Cars and Lion One 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 Lion One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Lion One Metals, you can compare the effects of market volatilities on Cars and Lion One 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 Lion One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Lion One.
Diversification Opportunities for Cars and Lion One
Excellent diversification
The 3 months correlation between Cars and Lion is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Lion One Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion One Metals 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 Lion One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion One Metals has no effect on the direction of Cars i.e., Cars and Lion One go up and down completely randomly.
Pair Corralation between Cars and Lion One
Assuming the 90 days horizon Cars Inc is expected to generate 0.63 times more return on investment than Lion One. However, Cars Inc is 1.6 times less risky than Lion One. It trades about 0.04 of its potential returns per unit of risk. Lion One Metals is currently generating about -0.03 per unit of risk. If you would invest 1,290 in Cars Inc on September 4, 2024 and sell it today you would earn a total of 560.00 from holding Cars Inc or generate 43.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. Lion One Metals
Performance |
| Timeline |
| Cars Inc |
| Lion One Metals |
Cars and Lion One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Lion One
The main advantage of trading using opposite Cars and Lion One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, Lion One 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 Lion One will offset losses from the drop in Lion One's long position.| Cars vs. Penske Automotive Group | Cars vs. Asbury Automotive Group | Cars vs. Superior Plus Corp | Cars vs. NMI Holdings |
| Lion One vs. HEALTHCARE REAL A | Lion One vs. Goosehead Insurance | Lion One vs. INSURANCE AUST GRP | Lion One vs. SBI Insurance Group |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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