Correlation Between TrueCar and Auto Trader
Can any of the company-specific risk be diversified away by investing in both TrueCar 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 TrueCar and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TrueCar and Auto Trader Group, you can compare the effects of market volatilities on TrueCar 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 TrueCar with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of TrueCar and Auto Trader.
Diversification Opportunities for TrueCar and Auto Trader
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between TrueCar and Auto is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding TrueCar 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 TrueCar 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 TrueCar 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 TrueCar i.e., TrueCar and Auto Trader go up and down completely randomly.
Pair Corralation between TrueCar and Auto Trader
Given the investment horizon of 90 days TrueCar is expected to under-perform the Auto Trader. In addition to that, TrueCar is 2.24 times more volatile than Auto Trader Group. It trades about -0.21 of its total potential returns per unit of risk. Auto Trader Group is currently generating about 0.02 per unit of volatility. If you would invest 246.00 in Auto Trader Group on January 10, 2025 and sell it today you would earn a total of 1.00 from holding Auto Trader Group or generate 0.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TrueCar vs. Auto Trader Group
Performance |
| Timeline |
| TrueCar |
| Auto Trader Group |
TrueCar and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TrueCar and Auto Trader
The main advantage of trading using opposite TrueCar and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TrueCar 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.The idea behind TrueCar and Auto Trader Group 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.| Auto Trader vs. Tinybeans Group Limited | Auto Trader vs. DGTL Holdings | Auto Trader vs. Sabio Holdings | Auto Trader vs. Zoomd Technologies |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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