Correlation Between TRON and CarGurus
Can any of the company-specific risk be diversified away by investing in both TRON and CarGurus 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 TRON and CarGurus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TRON and CarGurus, you can compare the effects of market volatilities on TRON and CarGurus 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 TRON with a short position of CarGurus. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRON and CarGurus.
Diversification Opportunities for TRON and CarGurus
Very poor diversification
The 3 months correlation between TRON and CarGurus is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding TRON and CarGurus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarGurus and TRON 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 TRON are associated (or correlated) with CarGurus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarGurus has no effect on the direction of TRON i.e., TRON and CarGurus go up and down completely randomly.
Pair Corralation between TRON and CarGurus
Assuming the 90 days trading horizon TRON is expected to generate 2.7 times less return on investment than CarGurus. In addition to that, TRON is 2.56 times more volatile than CarGurus. It trades about 0.02 of its total potential returns per unit of risk. CarGurus is currently generating about 0.14 per unit of volatility. If you would invest 3,608 in CarGurus on October 20, 2024 and sell it today you would earn a total of 171.00 from holding CarGurus or generate 4.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 90.91% |
| Values | Daily Returns |
TRON vs. CarGurus
Performance |
| Timeline |
| TRON |
| CarGurus |
TRON and CarGurus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TRON and CarGurus
The main advantage of trading using opposite TRON and CarGurus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRON position performs unexpectedly, CarGurus 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 CarGurus will offset losses from the drop in CarGurus' long position.The idea behind TRON and CarGurus 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.| CarGurus vs. KAR Auction Services | CarGurus vs. Kingsway Financial Services | CarGurus vs. Driven Brands Holdings | CarGurus vs. Group 1 Automotive |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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