Correlation Between Carsales and FAST RETAIL
Can any of the company-specific risk be diversified away by investing in both Carsales and FAST RETAIL 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 FAST RETAIL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and FAST RETAIL ADR, you can compare the effects of market volatilities on Carsales and FAST RETAIL 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 FAST RETAIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and FAST RETAIL.
Diversification Opportunities for Carsales and FAST RETAIL
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Carsales and FAST is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and FAST RETAIL ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAST RETAIL ADR 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 FAST RETAIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAST RETAIL ADR has no effect on the direction of Carsales i.e., Carsales and FAST RETAIL go up and down completely randomly.
Pair Corralation between Carsales and FAST RETAIL
Assuming the 90 days horizon CarsalesCom is expected to generate 0.83 times more return on investment than FAST RETAIL. However, CarsalesCom is 1.21 times less risky than FAST RETAIL. It trades about 0.32 of its potential returns per unit of risk. FAST RETAIL ADR is currently generating about -0.14 per unit of risk. If you would invest 2,160 in CarsalesCom on November 3, 2024 and sell it today you would earn a total of 240.00 from holding CarsalesCom or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. FAST RETAIL ADR
Performance |
| Timeline |
| CarsalesCom |
| FAST RETAIL ADR |
Carsales and FAST RETAIL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and FAST RETAIL
The main advantage of trading using opposite Carsales and FAST RETAIL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, FAST RETAIL 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 FAST RETAIL will offset losses from the drop in FAST RETAIL's long position.| Carsales vs. The Yokohama Rubber | Carsales vs. The Boston Beer | Carsales vs. Suntory Beverage Food | Carsales vs. Tsingtao Brewery |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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