Correlation Between Carsales and Genuine Parts
Can any of the company-specific risk be diversified away by investing in both Carsales and Genuine Parts 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 Genuine Parts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and Genuine Parts, you can compare the effects of market volatilities on Carsales and Genuine Parts 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 Genuine Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Genuine Parts.
Diversification Opportunities for Carsales and Genuine Parts
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Carsales and Genuine is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Genuine Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of Carsales i.e., Carsales and Genuine Parts go up and down completely randomly.
Pair Corralation between Carsales and Genuine Parts
Assuming the 90 days horizon CarsalesCom is expected to generate 0.87 times more return on investment than Genuine Parts. However, CarsalesCom is 1.15 times less risky than Genuine Parts. It trades about 0.1 of its potential returns per unit of risk. Genuine Parts is currently generating about -0.02 per unit of risk. If you would invest 1,282 in CarsalesCom on September 4, 2024 and sell it today you would earn a total of 1,278 from holding CarsalesCom or generate 99.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. Genuine Parts
Performance |
| Timeline |
| CarsalesCom |
| Genuine Parts |
Carsales and Genuine Parts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Genuine Parts
The main advantage of trading using opposite Carsales and Genuine Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, Genuine Parts 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 Genuine Parts will offset losses from the drop in Genuine Parts' long position.| Carsales vs. BRIT AMER TOBACCO | Carsales vs. Japan Tobacco | Carsales vs. MICRONIC MYDATA | Carsales vs. FUYO GENERAL LEASE |
| Genuine Parts vs. International Game Technology | Genuine Parts vs. CarsalesCom | Genuine Parts vs. QINGCI GAMES INC | Genuine Parts vs. Cars Inc |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |