Correlation Between VEON and CarGurus
Can any of the company-specific risk be diversified away by investing in both VEON 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 VEON and CarGurus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VEON and CarGurus, you can compare the effects of market volatilities on VEON 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 VEON with a short position of CarGurus. Check out your portfolio center. Please also check ongoing floating volatility patterns of VEON and CarGurus.
Diversification Opportunities for VEON and CarGurus
Very poor diversification
The 3 months correlation between VEON and CarGurus is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding VEON and CarGurus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarGurus and VEON 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 VEON 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 VEON i.e., VEON and CarGurus go up and down completely randomly.
Pair Corralation between VEON and CarGurus
Given the investment horizon of 90 days VEON is expected to generate 1.25 times less return on investment than CarGurus. In addition to that, VEON is 1.18 times more volatile than CarGurus. It trades about 0.07 of its total potential returns per unit of risk. CarGurus is currently generating about 0.1 per unit of volatility. If you would invest 1,193 in CarGurus on August 28, 2024 and sell it today you would earn a total of 2,390 from holding CarGurus or generate 200.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VEON vs. CarGurus
Performance |
| Timeline |
| VEON |
| CarGurus |
VEON and CarGurus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VEON and CarGurus
The main advantage of trading using opposite VEON and CarGurus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VEON 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 VEON 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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