Correlation Between Sage Group and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Sage Group and Auto Trader 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 Sage Group and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sage Group PLC and Auto Trader Group, you can compare the effects of market volatilities on Sage Group and Auto Trader 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 Sage Group with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Group and Auto Trader.
Diversification Opportunities for Sage Group and Auto Trader
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sage and Auto is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sage Group PLC and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Sage Group 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 Sage Group PLC are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Sage Group i.e., Sage Group and Auto Trader go up and down completely randomly.
Pair Corralation between Sage Group and Auto Trader
Assuming the 90 days horizon Sage Group PLC is expected to generate 1.97 times more return on investment than Auto Trader. However, Sage Group is 1.97 times more volatile than Auto Trader Group. It trades about 0.26 of its potential returns per unit of risk. Auto Trader Group is currently generating about -0.23 per unit of risk. If you would invest 5,262 in Sage Group PLC on August 27, 2024 and sell it today you would earn a total of 1,232 from holding Sage Group PLC or generate 23.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sage Group PLC vs. Auto Trader Group
Performance |
| Timeline |
| Sage Group PLC |
| Auto Trader Group |
Sage Group and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sage Group and Auto Trader
The main advantage of trading using opposite Sage Group and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sage Group position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Sage Group vs. Salesforce | Sage Group vs. SAP SE ADR | Sage Group vs. ServiceNow | Sage Group vs. Intuit Inc |
| Auto Trader vs. Trivago NV | Auto Trader vs. YY Inc Class | Auto Trader vs. DouYu International Holdings | Auto Trader vs. Tencent Music Entertainment |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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