Correlation Between Snowflake and Prestige Cars
Can any of the company-specific risk be diversified away by investing in both Snowflake and Prestige 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 Snowflake and Prestige Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snowflake and Prestige Cars International, you can compare the effects of market volatilities on Snowflake and Prestige 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 Snowflake with a short position of Prestige Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snowflake and Prestige Cars.
Diversification Opportunities for Snowflake and Prestige Cars
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snowflake and Prestige is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Snowflake and Prestige Cars International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Cars Intern and Snowflake 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 Snowflake are associated (or correlated) with Prestige Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prestige Cars Intern has no effect on the direction of Snowflake i.e., Snowflake and Prestige Cars go up and down completely randomly.
Pair Corralation between Snowflake and Prestige Cars
Given the investment horizon of 90 days Snowflake is expected to generate 2.96 times less return on investment than Prestige Cars. But when comparing it to its historical volatility, Snowflake is 3.03 times less risky than Prestige Cars. It trades about 0.06 of its potential returns per unit of risk. Prestige Cars International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.63 in Prestige Cars International on August 28, 2024 and sell it today you would earn a total of 0.24 from holding Prestige Cars International or generate 38.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snowflake vs. Prestige Cars International
Performance |
| Timeline |
| Snowflake |
| Prestige Cars Intern |
Snowflake and Prestige Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snowflake and Prestige Cars
The main advantage of trading using opposite Snowflake and Prestige Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snowflake position performs unexpectedly, Prestige 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 Prestige Cars will offset losses from the drop in Prestige Cars' long position.The idea behind Snowflake and Prestige Cars International 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.| Prestige Cars vs. Group 1 Automotive | Prestige Cars vs. AutoNation | Prestige Cars vs. Sonic Automotive | Prestige Cars vs. Asbury Automotive Group |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |