Correlation Between CVW CLEANTECH and AUTO TRADER
Can any of the company-specific risk be diversified away by investing in both CVW CLEANTECH 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 CVW CLEANTECH and AUTO TRADER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVW CLEANTECH INC and AUTO TRADER ADR, you can compare the effects of market volatilities on CVW CLEANTECH 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 CVW CLEANTECH with a short position of AUTO TRADER. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVW CLEANTECH and AUTO TRADER.
Diversification Opportunities for CVW CLEANTECH and AUTO TRADER
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CVW and AUTO is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CVW CLEANTECH INC and AUTO TRADER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTO TRADER ADR and CVW CLEANTECH 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 CVW CLEANTECH INC 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 ADR has no effect on the direction of CVW CLEANTECH i.e., CVW CLEANTECH and AUTO TRADER go up and down completely randomly.
Pair Corralation between CVW CLEANTECH and AUTO TRADER
Assuming the 90 days trading horizon CVW CLEANTECH INC is expected to generate 3.01 times more return on investment than AUTO TRADER. However, CVW CLEANTECH is 3.01 times more volatile than AUTO TRADER ADR. It trades about 0.05 of its potential returns per unit of risk. AUTO TRADER ADR is currently generating about 0.03 per unit of risk. If you would invest 56.00 in CVW CLEANTECH INC on October 23, 2024 and sell it today you would earn a total of 1.00 from holding CVW CLEANTECH INC or generate 1.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVW CLEANTECH INC vs. AUTO TRADER ADR
Performance |
| Timeline |
| CVW CLEANTECH INC |
| AUTO TRADER ADR |
CVW CLEANTECH and AUTO TRADER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVW CLEANTECH and AUTO TRADER
The main advantage of trading using opposite CVW CLEANTECH and AUTO TRADER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVW CLEANTECH 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.| CVW CLEANTECH vs. Rio Tinto Group | CVW CLEANTECH vs. Anglo American plc | CVW CLEANTECH vs. Mineral Resources Limited | CVW CLEANTECH vs. Liontown Resources Limited |
| AUTO TRADER vs. Hanison Construction Holdings | AUTO TRADER vs. Australian Agricultural | AUTO TRADER vs. GRIFFIN MINING LTD | AUTO TRADER vs. Dairy Farm International |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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