Correlation Between Carsales and LOCKHEED

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Can any of the company-specific risk be diversified away by investing in both Carsales and LOCKHEED 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 LOCKHEED 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 LOCKHEED MARTIN P, you can compare the effects of market volatilities on Carsales and LOCKHEED 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 LOCKHEED. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and LOCKHEED.

Diversification Opportunities for Carsales and LOCKHEED

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Carsales and LOCKHEED is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and LOCKHEED MARTIN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOCKHEED MARTIN P 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 LOCKHEED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOCKHEED MARTIN P has no effect on the direction of Carsales i.e., Carsales and LOCKHEED go up and down completely randomly.

Pair Corralation between Carsales and LOCKHEED

Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to generate 3.44 times more return on investment than LOCKHEED. However, Carsales is 3.44 times more volatile than LOCKHEED MARTIN P. It trades about 0.07 of its potential returns per unit of risk. LOCKHEED MARTIN P is currently generating about 0.09 per unit of risk. If you would invest  5,196  in CarsalesCom Ltd ADR on August 27, 2024 and sell it today you would earn a total of  167.00  from holding CarsalesCom Ltd ADR or generate 3.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

CarsalesCom Ltd ADR  vs.  LOCKHEED MARTIN P

 Performance 
       Timeline  
CarsalesCom ADR 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Carsales may actually be approaching a critical reversion point that can send shares even higher in December 2024.
LOCKHEED MARTIN P 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days LOCKHEED MARTIN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LOCKHEED is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Carsales and LOCKHEED Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carsales and LOCKHEED

The main advantage of trading using opposite Carsales and LOCKHEED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, LOCKHEED 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 LOCKHEED will offset losses from the drop in LOCKHEED's long position.
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The idea behind CarsalesCom Ltd ADR and LOCKHEED MARTIN P 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.
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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