Correlation Between Carsales and PPHE HOTEL
Can any of the company-specific risk be diversified away by investing in both Carsales and PPHE HOTEL 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 PPHE HOTEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and PPHE HOTEL GROUP, you can compare the effects of market volatilities on Carsales and PPHE HOTEL 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 PPHE HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and PPHE HOTEL.
Diversification Opportunities for Carsales and PPHE HOTEL
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Carsales and PPHE is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and PPHE HOTEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE HOTEL GROUP 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 Carsales are associated (or correlated) with PPHE HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE HOTEL GROUP has no effect on the direction of Carsales i.e., Carsales and PPHE HOTEL go up and down completely randomly.
Pair Corralation between Carsales and PPHE HOTEL
Assuming the 90 days trading horizon Carsales is expected to generate 0.87 times more return on investment than PPHE HOTEL. However, Carsales is 1.15 times less risky than PPHE HOTEL. It trades about 0.09 of its potential returns per unit of risk. PPHE HOTEL GROUP is currently generating about 0.03 per unit of risk. If you would invest 1,208 in Carsales on September 21, 2024 and sell it today you would earn a total of 1,032 from holding Carsales or generate 85.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carsales vs. PPHE HOTEL GROUP
Performance |
| Timeline |
| Carsales |
| PPHE HOTEL GROUP |
Carsales and PPHE HOTEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and PPHE HOTEL
The main advantage of trading using opposite Carsales and PPHE HOTEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, PPHE HOTEL 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 PPHE HOTEL will offset losses from the drop in PPHE HOTEL's long position.The idea behind Carsales and PPHE HOTEL GROUP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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