Correlation Between Carsales and Gladstone Investment
Can any of the company-specific risk be diversified away by investing in both Carsales and Gladstone Investment 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 Gladstone Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and Gladstone Investment, you can compare the effects of market volatilities on Carsales and Gladstone Investment 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 Gladstone Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Gladstone Investment.
Diversification Opportunities for Carsales and Gladstone Investment
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Carsales and Gladstone is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment 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 Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of Carsales i.e., Carsales and Gladstone Investment go up and down completely randomly.
Pair Corralation between Carsales and Gladstone Investment
Assuming the 90 days horizon CarsalesCom is expected to generate 0.63 times more return on investment than Gladstone Investment. However, CarsalesCom is 1.58 times less risky than Gladstone Investment. It trades about 0.37 of its potential returns per unit of risk. Gladstone Investment is currently generating about -0.05 per unit of risk. If you would invest 2,240 in CarsalesCom on August 28, 2024 and sell it today you would earn a total of 240.00 from holding CarsalesCom or generate 10.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
CarsalesCom vs. Gladstone Investment
Performance |
| Timeline |
| CarsalesCom |
| Gladstone Investment |
Carsales and Gladstone Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Gladstone Investment
The main advantage of trading using opposite Carsales and Gladstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, Gladstone Investment 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 Gladstone Investment will offset losses from the drop in Gladstone Investment's long position.| Carsales vs. CapitaLand Investment Limited | Carsales vs. Genco Shipping Trading | Carsales vs. MGIC INVESTMENT | Carsales vs. WisdomTree Investments |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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