Correlation Between RETAIL FOOD and Cars
Can any of the company-specific risk be diversified away by investing in both RETAIL FOOD and Cars 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 RETAIL FOOD and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RETAIL FOOD GROUP and Cars Inc, you can compare the effects of market volatilities on RETAIL FOOD and Cars 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 RETAIL FOOD with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and Cars.
Diversification Opportunities for RETAIL FOOD and Cars
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between RETAIL and Cars is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and RETAIL FOOD 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 RETAIL FOOD GROUP are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of RETAIL FOOD i.e., RETAIL FOOD and Cars go up and down completely randomly.
Pair Corralation between RETAIL FOOD and Cars
Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to generate 1.1 times more return on investment than Cars. However, RETAIL FOOD is 1.1 times more volatile than Cars Inc. It trades about 0.05 of its potential returns per unit of risk. Cars Inc is currently generating about 0.01 per unit of risk. If you would invest 3.65 in RETAIL FOOD GROUP on August 31, 2024 and sell it today you would earn a total of 0.55 from holding RETAIL FOOD GROUP or generate 15.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.23% |
| Values | Daily Returns |
RETAIL FOOD GROUP vs. Cars Inc
Performance |
| Timeline |
| RETAIL FOOD GROUP |
| Cars Inc |
RETAIL FOOD and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RETAIL FOOD and Cars
The main advantage of trading using opposite RETAIL FOOD and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RETAIL FOOD position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc |
| Cars vs. SALESFORCE INC CDR | Cars vs. FAST RETAIL ADR | Cars vs. Auto Trader Group | Cars vs. SHIP HEALTHCARE HLDGINC |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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