Correlation Between Carsales and BANK OF CHINA
Can any of the company-specific risk be diversified away by investing in both Carsales and BANK OF CHINA 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 BANK OF CHINA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and BANK OF CHINA, you can compare the effects of market volatilities on Carsales and BANK OF CHINA 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 BANK OF CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and BANK OF CHINA.
Diversification Opportunities for Carsales and BANK OF CHINA
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Carsales and BANK is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and BANK OF CHINA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OF CHINA 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 BANK OF CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OF CHINA has no effect on the direction of Carsales i.e., Carsales and BANK OF CHINA go up and down completely randomly.
Pair Corralation between Carsales and BANK OF CHINA
Assuming the 90 days horizon Carsales is expected to generate 3.34 times less return on investment than BANK OF CHINA. But when comparing it to its historical volatility, CarsalesCom is 4.1 times less risky than BANK OF CHINA. It trades about 0.08 of its potential returns per unit of risk. BANK OF CHINA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 14.00 in BANK OF CHINA on October 11, 2024 and sell it today you would earn a total of 35.00 from holding BANK OF CHINA or generate 250.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. BANK OF CHINA
Performance |
| Timeline |
| CarsalesCom |
| BANK OF CHINA |
Carsales and BANK OF CHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and BANK OF CHINA
The main advantage of trading using opposite Carsales and BANK OF CHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, BANK OF CHINA 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 BANK OF CHINA will offset losses from the drop in BANK OF CHINA's long position.| Carsales vs. FLOW TRADERS LTD | Carsales vs. Retail Estates NV | Carsales vs. National Retail Properties | Carsales vs. H2O Retailing |
| BANK OF CHINA vs. Adtalem Global Education | BANK OF CHINA vs. CarsalesCom | BANK OF CHINA vs. G8 EDUCATION | BANK OF CHINA vs. QURATE RETAIL INC |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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