Correlation Between IZEA and TrueCar
Can any of the company-specific risk be diversified away by investing in both IZEA and TrueCar 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 IZEA and TrueCar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IZEA Inc and TrueCar, you can compare the effects of market volatilities on IZEA and TrueCar 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 IZEA with a short position of TrueCar. Check out your portfolio center. Please also check ongoing floating volatility patterns of IZEA and TrueCar.
Diversification Opportunities for IZEA and TrueCar
Very poor diversification
The 3 months correlation between IZEA and TrueCar is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding IZEA Inc and TrueCar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrueCar and IZEA 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 IZEA Inc are associated (or correlated) with TrueCar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrueCar has no effect on the direction of IZEA i.e., IZEA and TrueCar go up and down completely randomly.
Pair Corralation between IZEA and TrueCar
Given the investment horizon of 90 days IZEA Inc is expected to under-perform the TrueCar. But the stock apears to be less risky and, when comparing its historical volatility, IZEA Inc is 1.55 times less risky than TrueCar. The stock trades about -0.08 of its potential returns per unit of risk. The TrueCar is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 377.00 in TrueCar on August 28, 2024 and sell it today you would earn a total of 37.00 from holding TrueCar or generate 9.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
IZEA Inc vs. TrueCar
Performance |
| Timeline |
| IZEA Inc |
| TrueCar |
IZEA and TrueCar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IZEA and TrueCar
The main advantage of trading using opposite IZEA and TrueCar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IZEA position performs unexpectedly, TrueCar 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 TrueCar will offset losses from the drop in TrueCar's long position.The idea behind IZEA Inc and TrueCar 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.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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