Correlation Between Carsales and Cars
Can any of the company-specific risk be diversified away by investing in both Carsales and Cars 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 Carsales and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom Ltd ADR and Cars Inc, you can compare the effects of market volatilities on Carsales and Cars 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 Carsales with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Cars.
Diversification Opportunities for Carsales and Cars
Weak diversification
The 3 months correlation between Carsales and Cars is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and Carsales 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 CarsalesCom Ltd ADR are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Carsales i.e., Carsales and Cars go up and down completely randomly.
Pair Corralation between Carsales and Cars
If you would invest 1,684 in Cars Inc on November 2, 2024 and sell it today you would earn a total of 166.00 from holding Cars Inc or generate 9.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom Ltd ADR vs. Cars Inc
Performance |
| Timeline |
| CarsalesCom ADR |
| Cars Inc |
Carsales and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Cars
The main advantage of trading using opposite Carsales and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| Carsales vs. Quizam Media | Carsales vs. DGTL Holdings | Carsales vs. Tinybeans Group Limited | Carsales vs. Sabio Holdings |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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