Correlation Between Cars and CARSALES
Can any of the company-specific risk be diversified away by investing in both Cars and CARSALES 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 CARSALES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and CARSALESCOM, you can compare the effects of market volatilities on Cars and CARSALES 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 CARSALES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and CARSALES.
Diversification Opportunities for Cars and CARSALES
Poor diversification
The 3 months correlation between Cars and CARSALES is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Cars i.e., Cars and CARSALES go up and down completely randomly.
Pair Corralation between Cars and CARSALES
Assuming the 90 days horizon Cars is expected to generate 6.39 times less return on investment than CARSALES. In addition to that, Cars is 1.44 times more volatile than CARSALESCOM. It trades about 0.01 of its total potential returns per unit of risk. CARSALESCOM is currently generating about 0.11 per unit of volatility. If you would invest 2,064 in CARSALESCOM on September 2, 2024 and sell it today you would earn a total of 496.00 from holding CARSALESCOM or generate 24.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. CARSALESCOM
Performance |
| Timeline |
| Cars Inc |
| CARSALESCOM |
Cars and CARSALES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and CARSALES
The main advantage of trading using opposite Cars and CARSALES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, CARSALES 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 CARSALES will offset losses from the drop in CARSALES's long position.| Cars vs. Ameriprise Financial | Cars vs. PENN NATL GAMING | Cars vs. QBE Insurance Group | Cars vs. FRACTAL GAMING GROUP |
| CARSALES vs. ASURE SOFTWARE | CARSALES vs. Austevoll Seafood ASA | CARSALES vs. INDOFOOD AGRI RES | CARSALES vs. Magic Software Enterprises |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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