Correlation Between Carsales and FLOW TRADERS
Can any of the company-specific risk be diversified away by investing in both Carsales and FLOW TRADERS 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 FLOW TRADERS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and FLOW TRADERS LTD, you can compare the effects of market volatilities on Carsales and FLOW TRADERS 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 FLOW TRADERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and FLOW TRADERS.
Diversification Opportunities for Carsales and FLOW TRADERS
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Carsales and FLOW is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and FLOW TRADERS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLOW TRADERS LTD 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 FLOW TRADERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLOW TRADERS LTD has no effect on the direction of Carsales i.e., Carsales and FLOW TRADERS go up and down completely randomly.
Pair Corralation between Carsales and FLOW TRADERS
Assuming the 90 days horizon CarsalesCom is expected to generate 0.78 times more return on investment than FLOW TRADERS. However, CarsalesCom is 1.29 times less risky than FLOW TRADERS. It trades about 0.08 of its potential returns per unit of risk. FLOW TRADERS LTD is currently generating about 0.03 per unit of risk. If you would invest 1,273 in CarsalesCom on November 29, 2024 and sell it today you would earn a total of 947.00 from holding CarsalesCom or generate 74.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. FLOW TRADERS LTD
Performance |
| Timeline |
| CarsalesCom |
| FLOW TRADERS LTD |
Carsales and FLOW TRADERS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and FLOW TRADERS
The main advantage of trading using opposite Carsales and FLOW TRADERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, FLOW TRADERS 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 FLOW TRADERS will offset losses from the drop in FLOW TRADERS's long position.| Carsales vs. KOBE STEEL LTD | Carsales vs. ANGANG STEEL H | Carsales vs. VITEC SOFTWARE GROUP | Carsales vs. USU Software AG |
| FLOW TRADERS vs. Gladstone Investment | FLOW TRADERS vs. Commercial Vehicle Group | FLOW TRADERS vs. Carsales | FLOW TRADERS vs. REINET INVESTMENTS SCA |
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.
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