Correlation Between Carsales and MedMira
Can any of the company-specific risk be diversified away by investing in both Carsales and MedMira 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 MedMira into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and MedMira, you can compare the effects of market volatilities on Carsales and MedMira 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 MedMira. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and MedMira.
Diversification Opportunities for Carsales and MedMira
Very good diversification
The 3 months correlation between Carsales and MedMira is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and MedMira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MedMira 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 MedMira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MedMira has no effect on the direction of Carsales i.e., Carsales and MedMira go up and down completely randomly.
Pair Corralation between Carsales and MedMira
Assuming the 90 days trading horizon Carsales is expected to generate 14.79 times less return on investment than MedMira. But when comparing it to its historical volatility, Carsales is 3.58 times less risky than MedMira. It trades about 0.07 of its potential returns per unit of risk. MedMira is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 5.00 in MedMira on October 20, 2024 and sell it today you would earn a total of 2.50 from holding MedMira or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carsales vs. MedMira
Performance |
| Timeline |
| Carsales |
| MedMira |
Carsales and MedMira Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and MedMira
The main advantage of trading using opposite Carsales and MedMira positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, MedMira 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 MedMira will offset losses from the drop in MedMira's long position.| Carsales vs. PLAYMATES TOYS | Carsales vs. GameStop Corp | Carsales vs. PNC Financial Services | Carsales vs. MOVIE GAMES SA |
| MedMira vs. Novo Nordisk AS | MedMira vs. CSL LTD SPONADR | MedMira vs. CSL Limited | MedMira vs. Mercedes Benz Group AG |
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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