Correlation Between Carsales and G8 EDUCATION
Can any of the company-specific risk be diversified away by investing in both Carsales and G8 EDUCATION 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 G8 EDUCATION into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and G8 EDUCATION, you can compare the effects of market volatilities on Carsales and G8 EDUCATION 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 G8 EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and G8 EDUCATION.
Diversification Opportunities for Carsales and G8 EDUCATION
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Carsales and 3EAG is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and G8 EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 EDUCATION 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 G8 EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 EDUCATION has no effect on the direction of Carsales i.e., Carsales and G8 EDUCATION go up and down completely randomly.
Pair Corralation between Carsales and G8 EDUCATION
Assuming the 90 days horizon CarsalesCom is expected to generate 0.79 times more return on investment than G8 EDUCATION. However, CarsalesCom is 1.27 times less risky than G8 EDUCATION. It trades about 0.08 of its potential returns per unit of risk. G8 EDUCATION is currently generating about 0.02 per unit of risk. If you would invest 1,310 in CarsalesCom on October 11, 2024 and sell it today you would earn a total of 990.00 from holding CarsalesCom or generate 75.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. G8 EDUCATION
Performance |
| Timeline |
| CarsalesCom |
| G8 EDUCATION |
Carsales and G8 EDUCATION Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and G8 EDUCATION
The main advantage of trading using opposite Carsales and G8 EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, G8 EDUCATION 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 G8 EDUCATION will offset losses from the drop in G8 EDUCATION's long position.| Carsales vs. MHP Hotel AG | Carsales vs. Meli Hotels International | Carsales vs. MELIA HOTELS | Carsales vs. Pebblebrook Hotel Trust |
| G8 EDUCATION vs. VIVA WINE GROUP | G8 EDUCATION vs. SAN MIGUEL BREWERY | G8 EDUCATION vs. Ebro Foods SA | G8 EDUCATION vs. Molson Coors Beverage |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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