Correlation Between Carsales and Aedas Homes
Can any of the company-specific risk be diversified away by investing in both Carsales and Aedas Homes 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 Aedas Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and Aedas Homes SA, you can compare the effects of market volatilities on Carsales and Aedas Homes 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 Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Aedas Homes.
Diversification Opportunities for Carsales and Aedas Homes
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Carsales and Aedas is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA 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 Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SA has no effect on the direction of Carsales i.e., Carsales and Aedas Homes go up and down completely randomly.
Pair Corralation between Carsales and Aedas Homes
Assuming the 90 days horizon CarsalesCom is expected to generate 0.73 times more return on investment than Aedas Homes. However, CarsalesCom is 1.36 times less risky than Aedas Homes. It trades about 0.35 of its potential returns per unit of risk. Aedas Homes SA is currently generating about -0.13 per unit of risk. If you would invest 2,240 in CarsalesCom on August 29, 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. Aedas Homes SA
Performance |
| Timeline |
| CarsalesCom |
| Aedas Homes SA |
Carsales and Aedas Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Aedas Homes
The main advantage of trading using opposite Carsales and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, Aedas Homes 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 Aedas Homes will offset losses from the drop in Aedas Homes' long position.| Carsales vs. CapitaLand Investment Limited | Carsales vs. Genco Shipping Trading | Carsales vs. MGIC INVESTMENT | Carsales vs. WisdomTree Investments |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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