Correlation Between Patterson Companies and CARSALES
Can any of the company-specific risk be diversified away by investing in both Patterson Companies 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 Patterson Companies and CARSALES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Patterson Companies and CARSALESCOM, you can compare the effects of market volatilities on Patterson Companies 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 Patterson Companies with a short position of CARSALES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patterson Companies and CARSALES.
Diversification Opportunities for Patterson Companies and CARSALES
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Patterson and CARSALES is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Patterson Companies and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM and Patterson Companies 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 Patterson Companies 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 Patterson Companies i.e., Patterson Companies and CARSALES go up and down completely randomly.
Pair Corralation between Patterson Companies and CARSALES
Assuming the 90 days horizon Patterson Companies is expected to generate 1.41 times less return on investment than CARSALES. In addition to that, Patterson Companies is 2.08 times more volatile than CARSALESCOM. It trades about 0.14 of its total potential returns per unit of risk. CARSALESCOM is currently generating about 0.4 per unit of volatility. If you would invest 2,280 in CARSALESCOM on September 5, 2024 and sell it today you would earn a total of 280.00 from holding CARSALESCOM or generate 12.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Patterson Companies vs. CARSALESCOM
Performance |
| Timeline |
| Patterson Companies |
| CARSALESCOM |
Patterson Companies and CARSALES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Patterson Companies and CARSALES
The main advantage of trading using opposite Patterson Companies and CARSALES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patterson Companies 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's long position.| Patterson Companies vs. CARSALESCOM | Patterson Companies vs. Perseus Mining Limited | Patterson Companies vs. MTI WIRELESS EDGE | Patterson Companies vs. T MOBILE INCDL 00001 |
| CARSALES vs. ITALIAN WINE BRANDS | CARSALES vs. Grupo Carso SAB | CARSALES vs. MACOM Technology Solutions | CARSALES vs. Cars Inc |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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