Correlation Between Carsales and RETAIL FOOD
Can any of the company-specific risk be diversified away by investing in both Carsales and RETAIL FOOD 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 RETAIL FOOD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and RETAIL FOOD GROUP, you can compare the effects of market volatilities on Carsales and RETAIL FOOD 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 RETAIL FOOD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and RETAIL FOOD.
Diversification Opportunities for Carsales and RETAIL FOOD
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Carsales and RETAIL is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and RETAIL FOOD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RETAIL FOOD GROUP 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 RETAIL FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RETAIL FOOD GROUP has no effect on the direction of Carsales i.e., Carsales and RETAIL FOOD go up and down completely randomly.
Pair Corralation between Carsales and RETAIL FOOD
Assuming the 90 days horizon CarsalesCom is expected to generate 0.41 times more return on investment than RETAIL FOOD. However, CarsalesCom is 2.43 times less risky than RETAIL FOOD. It trades about 0.27 of its potential returns per unit of risk. RETAIL FOOD GROUP is currently generating about -0.21 per unit of risk. If you would invest 2,220 in CarsalesCom on November 5, 2024 and sell it today you would earn a total of 200.00 from holding CarsalesCom or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. RETAIL FOOD GROUP
Performance |
| Timeline |
| CarsalesCom |
| RETAIL FOOD GROUP |
Carsales and RETAIL FOOD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and RETAIL FOOD
The main advantage of trading using opposite Carsales and RETAIL FOOD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, RETAIL FOOD 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 RETAIL FOOD will offset losses from the drop in RETAIL FOOD's long position.| Carsales vs. UMC Electronics Co | Carsales vs. Cars Inc | Carsales vs. AOI Electronics Co | Carsales vs. Nanjing Panda Electronics |
| RETAIL FOOD vs. SIVERS SEMICONDUCTORS AB | RETAIL FOOD vs. NorAm Drilling AS | RETAIL FOOD vs. Volkswagen AG | RETAIL FOOD vs. Darden Restaurants |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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