Correlation Between Marks and Carsales
Can any of the company-specific risk be diversified away by investing in both Marks 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 Marks and Carsales into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marks and Spencer and Carsales, you can compare the effects of market volatilities on Marks 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 Marks with a short position of Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marks and Carsales.
Diversification Opportunities for Marks and Carsales
Average diversification
The 3 months correlation between Marks and Carsales is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Marks and Spencer and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales and Marks 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 Marks and Spencer 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 Marks i.e., Marks and Carsales go up and down completely randomly.
Pair Corralation between Marks and Carsales
Assuming the 90 days horizon Marks and Spencer is expected to under-perform the Carsales. In addition to that, Marks is 1.22 times more volatile than Carsales. It trades about -0.27 of its total potential returns per unit of risk. Carsales is currently generating about 0.14 per unit of volatility. If you would invest 2,240 in Carsales on October 28, 2024 and sell it today you would earn a total of 140.00 from holding Carsales or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marks and Spencer vs. Carsales
Performance |
| Timeline |
| Marks and Spencer |
| Carsales |
Marks and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marks and Carsales
The main advantage of trading using opposite Marks and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marks 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.| Marks vs. STRAYER EDUCATION | Marks vs. Wayside Technology Group | Marks vs. G III Apparel Group | Marks vs. Ribbon Communications |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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