Correlation Between Cars and Sempra
Can any of the company-specific risk be diversified away by investing in both Cars and Sempra 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 Sempra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Sempra, you can compare the effects of market volatilities on Cars and Sempra 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 Sempra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Sempra.
Diversification Opportunities for Cars and Sempra
Poor diversification
The 3 months correlation between Cars and Sempra is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Sempra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempra 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 Sempra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sempra has no effect on the direction of Cars i.e., Cars and Sempra go up and down completely randomly.
Pair Corralation between Cars and Sempra
Assuming the 90 days horizon Cars is expected to generate 1.34 times less return on investment than Sempra. In addition to that, Cars is 2.14 times more volatile than Sempra. It trades about 0.02 of its total potential returns per unit of risk. Sempra is currently generating about 0.07 per unit of volatility. If you would invest 6,491 in Sempra on September 4, 2024 and sell it today you would earn a total of 2,353 from holding Sempra or generate 36.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.74% |
| Values | Daily Returns |
Cars Inc vs. Sempra
Performance |
| Timeline |
| Cars Inc |
| Sempra |
Cars and Sempra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Sempra
The main advantage of trading using opposite Cars and Sempra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, Sempra 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 Sempra will offset losses from the drop in Sempra's long position.| Cars vs. Penske Automotive Group | Cars vs. Asbury Automotive Group | Cars vs. Superior Plus Corp | Cars vs. NMI Holdings |
| Sempra vs. Laureate Education | Sempra vs. Japan Medical Dynamic | Sempra vs. Xinhua Winshare Publishing | Sempra vs. DEVRY EDUCATION GRP |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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