Correlation Between Western Acquisition and CarsalesCom
Can any of the company-specific risk be diversified away by investing in both Western Acquisition and CarsalesCom 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 Western Acquisition and CarsalesCom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Acquisition Ventures and CarsalesCom Ltd ADR, you can compare the effects of market volatilities on Western Acquisition and CarsalesCom 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 Western Acquisition with a short position of CarsalesCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Acquisition and CarsalesCom.
Diversification Opportunities for Western Acquisition and CarsalesCom
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Western and CarsalesCom is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Western Acquisition Ventures and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR and Western Acquisition 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 Western Acquisition Ventures are associated (or correlated) with CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of Western Acquisition i.e., Western Acquisition and CarsalesCom go up and down completely randomly.
Pair Corralation between Western Acquisition and CarsalesCom
Given the investment horizon of 90 days Western Acquisition is expected to generate 15.13 times less return on investment than CarsalesCom. But when comparing it to its historical volatility, Western Acquisition Ventures is 1.67 times less risky than CarsalesCom. It trades about 0.01 of its potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,675 in CarsalesCom Ltd ADR on September 4, 2024 and sell it today you would earn a total of 1,732 from holding CarsalesCom Ltd ADR or generate 47.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 88.26% |
| Values | Daily Returns |
Western Acquisition Ventures vs. CarsalesCom Ltd ADR
Performance |
| Timeline |
| Western Acquisition |
| CarsalesCom ADR |
Western Acquisition and CarsalesCom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Acquisition and CarsalesCom
The main advantage of trading using opposite Western Acquisition and CarsalesCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Acquisition position performs unexpectedly, CarsalesCom 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 CarsalesCom will offset losses from the drop in CarsalesCom's long position.The idea behind Western Acquisition Ventures and CarsalesCom Ltd ADR 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.| CarsalesCom vs. Quizam Media | CarsalesCom vs. DGTL Holdings | CarsalesCom vs. Tinybeans Group Limited | CarsalesCom vs. Sabio Holdings |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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