Correlation Between Carsales and North American
Can any of the company-specific risk be diversified away by investing in both Carsales and North American 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 North American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and North American Construction, you can compare the effects of market volatilities on Carsales and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and North American.
Diversification Opportunities for Carsales and North American
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Carsales and North is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Carsales i.e., Carsales and North American go up and down completely randomly.
Pair Corralation between Carsales and North American
Assuming the 90 days horizon CarsalesCom is expected to generate 1.71 times more return on investment than North American. However, Carsales is 1.71 times more volatile than North American Construction. It trades about -0.13 of its potential returns per unit of risk. North American Construction is currently generating about -0.39 per unit of risk. If you would invest 2,380 in CarsalesCom on November 27, 2024 and sell it today you would lose (140.00) from holding CarsalesCom or give up 5.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. North American Construction
Performance |
| Timeline |
| CarsalesCom |
| North American Const |
Carsales and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and North American
The main advantage of trading using opposite Carsales and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| Carsales vs. AXWAY SOFTWARE EO | Carsales vs. Iridium Communications | Carsales vs. Unity Software | Carsales vs. Verizon Communications |
| North American vs. MINCO SILVER | North American vs. MAG Silver Corp | North American vs. TRADEGATE | North American vs. Endeavour Mining PLC |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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