Correlation Between Indutrade and Carsales

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Can any of the company-specific risk be diversified away by investing in both Indutrade 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 Indutrade and Carsales into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indutrade AB and Carsales, you can compare the effects of market volatilities on Indutrade 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 Indutrade with a short position of Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indutrade and Carsales.

Diversification Opportunities for Indutrade and Carsales

IndutradeCarsalesDiversified AwayIndutradeCarsalesDiversified Away100%
-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Indutrade and Carsales is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales and Indutrade 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 Indutrade AB 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 Carsales has no effect on the direction of Indutrade i.e., Indutrade and Carsales go up and down completely randomly.

Pair Corralation between Indutrade and Carsales

Assuming the 90 days horizon Indutrade AB is expected to generate 0.89 times more return on investment than Carsales. However, Indutrade AB is 1.12 times less risky than Carsales. It trades about 0.3 of its potential returns per unit of risk. Carsales is currently generating about -0.16 per unit of risk. If you would invest  2,602  in Indutrade AB on November 25, 2024 and sell it today you would earn a total of  258.00  from holding Indutrade AB or generate 9.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Indutrade AB  vs.  Carsales

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-505101520
JavaScript chart by amCharts 3.21.15I1M WN6
       Timeline  
Indutrade AB 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Indutrade AB are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Indutrade reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb242526272829
Carsales 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Carsales has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb21.52222.52323.52424.52525.526

Indutrade and Carsales Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.39-3.29-2.19-1.080.01.182.43.614.836.05 0.050.100.15
JavaScript chart by amCharts 3.21.15I1M WN6
       Returns  

Pair Trading with Indutrade and Carsales

The main advantage of trading using opposite Indutrade and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indutrade 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.
The idea behind Indutrade AB and Carsales 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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