Correlation Between Carsales and Clean Energy
Can any of the company-specific risk be diversified away by investing in both Carsales and Clean Energy 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 Clean Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and Clean Energy Fuels, you can compare the effects of market volatilities on Carsales and Clean Energy 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 Clean Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Clean Energy.
Diversification Opportunities for Carsales and Clean Energy
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Carsales and Clean is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Clean Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Fuels 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 Clean Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Energy Fuels has no effect on the direction of Carsales i.e., Carsales and Clean Energy go up and down completely randomly.
Pair Corralation between Carsales and Clean Energy
Assuming the 90 days horizon CarsalesCom is expected to under-perform the Clean Energy. But the stock apears to be less risky and, when comparing its historical volatility, CarsalesCom is 2.57 times less risky than Clean Energy. The stock trades about -0.1 of its potential returns per unit of risk. The Clean Energy Fuels is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 268.00 in Clean Energy Fuels on October 12, 2024 and sell it today you would earn a total of 13.00 from holding Clean Energy Fuels or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
CarsalesCom vs. Clean Energy Fuels
Performance |
| Timeline |
| CarsalesCom |
| Clean Energy Fuels |
Carsales and Clean Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Clean Energy
The main advantage of trading using opposite Carsales and Clean Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, Clean Energy 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 Clean Energy will offset losses from the drop in Clean Energy's long position.| Carsales vs. GALENA MINING LTD | Carsales vs. MCEWEN MINING INC | Carsales vs. MAG SILVER | Carsales vs. Japan Tobacco |
| Clean Energy vs. BOS BETTER ONLINE | Clean Energy vs. ANGLO ASIAN MINING | Clean Energy vs. CSSC Offshore Marine | Clean Energy vs. CarsalesCom |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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