Correlation Between CARSALES and Associated British
Can any of the company-specific risk be diversified away by investing in both CARSALES and Associated British 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 CARSALES and Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CARSALESCOM and Associated British Foods, you can compare the effects of market volatilities on CARSALES and Associated British 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 CARSALES with a short position of Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARSALES and Associated British.
Diversification Opportunities for CARSALES and Associated British
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CARSALES and Associated is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and CARSALES 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 CARSALESCOM are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of CARSALES i.e., CARSALES and Associated British go up and down completely randomly.
Pair Corralation between CARSALES and Associated British
Assuming the 90 days trading horizon CARSALESCOM is expected to generate 1.19 times more return on investment than Associated British. However, CARSALES is 1.19 times more volatile than Associated British Foods. It trades about 0.31 of its potential returns per unit of risk. Associated British Foods is currently generating about -0.25 per unit of risk. If you would invest 2,180 in CARSALESCOM on November 3, 2024 and sell it today you would earn a total of 260.00 from holding CARSALESCOM or generate 11.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CARSALESCOM vs. Associated British Foods
Performance |
| Timeline |
| CARSALESCOM |
| Associated British Foods |
CARSALES and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CARSALES and Associated British
The main advantage of trading using opposite CARSALES and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARSALES position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| CARSALES vs. CSSC Offshore Marine | CARSALES vs. United Rentals | CARSALES vs. US Physical Therapy | CARSALES vs. SIEM OFFSHORE NEW |
| Associated British vs. Richardson Electronics | Associated British vs. STMicroelectronics NV | Associated British vs. SALESFORCE INC CDR | Associated British vs. Salesforce |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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