Correlation Between CARSALESCOM and Carsales
Can any of the company-specific risk be diversified away by investing in both CARSALESCOM and Carsales 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 Carsales into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CARSALESCOM and Carsales, you can compare the effects of market volatilities on CARSALESCOM and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARSALESCOM and Carsales.
Diversification Opportunities for CARSALESCOM and Carsales
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between CARSALESCOM and Carsales is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of CARSALESCOM i.e., CARSALESCOM and Carsales go up and down completely randomly.
Pair Corralation between CARSALESCOM and Carsales
Assuming the 90 days trading horizon CARSALESCOM is expected to generate 1.13 times less return on investment than Carsales. But when comparing it to its historical volatility, CARSALESCOM is 1.38 times less risky than Carsales. It trades about 0.26 of its potential returns per unit of risk. Carsales is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,160 in Carsales on November 1, 2024 and sell it today you would earn a total of 220.00 from holding Carsales or generate 10.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CARSALESCOM vs. Carsales
Performance |
| Timeline |
| CARSALESCOM |
| Carsales |
CARSALESCOM and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CARSALESCOM and Carsales
The main advantage of trading using opposite CARSALESCOM and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARSALESCOM position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| CARSALESCOM vs. Harmony Gold Mining | CARSALESCOM vs. Aya Gold Silver | CARSALESCOM vs. MCEWEN MINING INC | CARSALESCOM vs. MHP Hotel AG |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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