Correlation Between Carsales and SIMS METAL
Can any of the company-specific risk be diversified away by investing in both Carsales and SIMS METAL 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 SIMS METAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and SIMS METAL MGT, you can compare the effects of market volatilities on Carsales and SIMS METAL 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 SIMS METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and SIMS METAL.
Diversification Opportunities for Carsales and SIMS METAL
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Carsales and SIMS is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and SIMS METAL MGT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMS METAL MGT 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 SIMS METAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMS METAL MGT has no effect on the direction of Carsales i.e., Carsales and SIMS METAL go up and down completely randomly.
Pair Corralation between Carsales and SIMS METAL
Assuming the 90 days horizon CarsalesCom is expected to generate 0.76 times more return on investment than SIMS METAL. However, CarsalesCom is 1.32 times less risky than SIMS METAL. It trades about 0.09 of its potential returns per unit of risk. SIMS METAL MGT is currently generating about 0.01 per unit of risk. If you would invest 1,338 in CarsalesCom on August 24, 2024 and sell it today you would earn a total of 1,162 from holding CarsalesCom or generate 86.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. SIMS METAL MGT
Performance |
| Timeline |
| CarsalesCom |
| SIMS METAL MGT |
Carsales and SIMS METAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and SIMS METAL
The main advantage of trading using opposite Carsales and SIMS METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, SIMS METAL 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 SIMS METAL will offset losses from the drop in SIMS METAL's long position.| Carsales vs. Gruppo Mutuionline SpA | Carsales vs. BURLINGTON STORES | Carsales vs. Caseys General Stores | Carsales vs. COSTCO WHOLESALE CDR |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |