Correlation Between CARSALESCOM and Cars
Can any of the company-specific risk be diversified away by investing in both CARSALESCOM and Cars 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 CARSALESCOM and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CARSALESCOM and Cars Inc, you can compare the effects of market volatilities on CARSALESCOM and Cars 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 CARSALESCOM with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARSALESCOM and Cars.
Diversification Opportunities for CARSALESCOM and Cars
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CARSALESCOM and Cars is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and CARSALESCOM 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of CARSALESCOM i.e., CARSALESCOM and Cars go up and down completely randomly.
Pair Corralation between CARSALESCOM and Cars
Assuming the 90 days trading horizon CARSALESCOM is expected to generate 0.97 times more return on investment than Cars. However, CARSALESCOM is 1.03 times less risky than Cars. It trades about -0.17 of its potential returns per unit of risk. Cars Inc is currently generating about -0.32 per unit of risk. If you would invest 2,400 in CARSALESCOM on November 29, 2024 and sell it today you would lose (180.00) from holding CARSALESCOM or give up 7.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CARSALESCOM vs. Cars Inc
Performance |
| Timeline |
| CARSALESCOM |
| Cars Inc |
CARSALESCOM and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CARSALESCOM and Cars
The main advantage of trading using opposite CARSALESCOM and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARSALESCOM position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| CARSALESCOM vs. Firan Technology Group | CARSALESCOM vs. Micron Technology | CARSALESCOM vs. Casio Computer CoLtd | CARSALESCOM vs. Kingdee International Software |
| Cars vs. Telecom Argentina SA | Cars vs. SK TELECOM TDADR | Cars vs. Iridium Communications | Cars vs. CHINA TELECOM H |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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