Correlation Between Canadian Utilities and Carsales
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities 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 Canadian Utilities and Carsales into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and CarsalesCom, you can compare the effects of market volatilities on Canadian Utilities 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 Canadian Utilities with a short position of Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Carsales.
Diversification Opportunities for Canadian Utilities and Carsales
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canadian and Carsales is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom and Canadian Utilities 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 Canadian Utilities Limited 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 Canadian Utilities i.e., Canadian Utilities and Carsales go up and down completely randomly.
Pair Corralation between Canadian Utilities and Carsales
Assuming the 90 days horizon Canadian Utilities Limited is expected to under-perform the Carsales. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Utilities Limited is 2.91 times less risky than Carsales. The stock trades about 0.0 of its potential returns per unit of risk. The CarsalesCom is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,260 in CarsalesCom on October 20, 2024 and sell it today you would earn a total of 0.00 from holding CarsalesCom or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Canadian Utilities Limited vs. CarsalesCom
Performance |
Timeline |
Canadian Utilities |
CarsalesCom |
Canadian Utilities and Carsales Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Canadian Utilities and Carsales
The main advantage of trading using opposite Canadian Utilities and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities 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' long position.Canadian Utilities vs. DeVry Education Group | Canadian Utilities vs. CAREER EDUCATION | Canadian Utilities vs. Summit Materials | Canadian Utilities vs. Zoom Video Communications |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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