Correlation Between Carsales and UNITED UTILITIES
Can any of the company-specific risk be diversified away by investing in both Carsales and UNITED UTILITIES 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 UNITED UTILITIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and UNITED UTILITIES GR, you can compare the effects of market volatilities on Carsales and UNITED UTILITIES 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 UNITED UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and UNITED UTILITIES.
Diversification Opportunities for Carsales and UNITED UTILITIES
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Carsales and UNITED is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and UNITED UTILITIES GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED UTILITIES 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 UNITED UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED UTILITIES has no effect on the direction of Carsales i.e., Carsales and UNITED UTILITIES go up and down completely randomly.
Pair Corralation between Carsales and UNITED UTILITIES
Assuming the 90 days horizon CarsalesCom is expected to generate 0.88 times more return on investment than UNITED UTILITIES. However, CarsalesCom is 1.13 times less risky than UNITED UTILITIES. It trades about 0.37 of its potential returns per unit of risk. UNITED UTILITIES GR is currently generating about 0.22 per unit of risk. If you would invest 2,240 in CarsalesCom on August 28, 2024 and sell it today you would earn a total of 240.00 from holding CarsalesCom or generate 10.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. UNITED UTILITIES GR
Performance |
| Timeline |
| CarsalesCom |
| UNITED UTILITIES |
Carsales and UNITED UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and UNITED UTILITIES
The main advantage of trading using opposite Carsales and UNITED UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, UNITED UTILITIES 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 UNITED UTILITIES will offset losses from the drop in UNITED UTILITIES's long position.| Carsales vs. Grupo Carso SAB | Carsales vs. COMMERCIAL VEHICLE | Carsales vs. ITALIAN WINE BRANDS | Carsales vs. BLUESCOPE STEEL |
| UNITED UTILITIES vs. JD SPORTS FASH | UNITED UTILITIES vs. Federal Agricultural Mortgage | UNITED UTILITIES vs. Granite Construction | UNITED UTILITIES vs. USWE SPORTS AB |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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