Correlation Between Carsales and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Carsales and Boston Beer 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 Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and The Boston Beer, you can compare the effects of market volatilities on Carsales and Boston Beer 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 Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Boston Beer.
Diversification Opportunities for Carsales and Boston Beer
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Carsales and Boston is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and The Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer 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 Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Carsales i.e., Carsales and Boston Beer go up and down completely randomly.
Pair Corralation between Carsales and Boston Beer
Assuming the 90 days horizon CarsalesCom is expected to generate 0.82 times more return on investment than Boston Beer. However, CarsalesCom is 1.21 times less risky than Boston Beer. It trades about -0.1 of its potential returns per unit of risk. The Boston Beer is currently generating about -0.49 per unit of risk. If you would invest 2,320 in CarsalesCom on October 13, 2024 and sell it today you would lose (60.00) from holding CarsalesCom or give up 2.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. The Boston Beer
Performance |
| Timeline |
| CarsalesCom |
| Boston Beer |
Carsales and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Boston Beer
The main advantage of trading using opposite Carsales and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, Boston Beer 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 Boston Beer will offset losses from the drop in Boston Beer's long position.| Carsales vs. OFFICE DEPOT | Carsales vs. GRUPO CARSO A1 | Carsales vs. Motorcar Parts of | Carsales vs. OPERA SOFTWARE |
| Boston Beer vs. CarsalesCom | Boston Beer vs. CARSALESCOM | Boston Beer vs. SEI INVESTMENTS | Boston Beer vs. YATRA ONLINE DL 0001 |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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