Correlation Between Carsales and ZhongAn Online
Can any of the company-specific risk be diversified away by investing in both Carsales and ZhongAn Online 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 ZhongAn Online 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 ZhongAn Online P, you can compare the effects of market volatilities on Carsales and ZhongAn Online 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 ZhongAn Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and ZhongAn Online.
Diversification Opportunities for Carsales and ZhongAn Online
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Carsales and ZhongAn is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and ZhongAn Online P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZhongAn Online 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 ZhongAn Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZhongAn Online P has no effect on the direction of Carsales i.e., Carsales and ZhongAn Online go up and down completely randomly.
Pair Corralation between Carsales and ZhongAn Online
Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to generate 0.65 times more return on investment than ZhongAn Online. However, CarsalesCom Ltd ADR is 1.55 times less risky than ZhongAn Online. It trades about -0.07 of its potential returns per unit of risk. ZhongAn Online P is currently generating about -0.12 per unit of risk. If you would invest 5,196 in CarsalesCom Ltd ADR on October 26, 2024 and sell it today you would lose (646.00) from holding CarsalesCom Ltd ADR or give up 12.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom Ltd ADR vs. ZhongAn Online P
Performance |
| Timeline |
| CarsalesCom ADR |
| ZhongAn Online P |
Carsales and ZhongAn Online Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and ZhongAn Online
The main advantage of trading using opposite Carsales and ZhongAn Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, ZhongAn Online 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 ZhongAn Online will offset losses from the drop in ZhongAn Online's long position.| Carsales vs. Quizam Media | Carsales vs. DGTL Holdings | Carsales vs. Tinybeans Group Limited | Carsales vs. Sabio Holdings |
| ZhongAn Online vs. Progressive Corp | ZhongAn Online vs. White Mountains Insurance | ZhongAn Online vs. Chubb | ZhongAn Online vs. W R Berkley |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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