Correlation Between Carsales and CapitaLand Investment
Can any of the company-specific risk be diversified away by investing in both Carsales and CapitaLand Investment 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 CapitaLand Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and CapitaLand Investment Limited, you can compare the effects of market volatilities on Carsales and CapitaLand Investment 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 CapitaLand Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and CapitaLand Investment.
Diversification Opportunities for Carsales and CapitaLand Investment
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Carsales and CapitaLand is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment 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 CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of Carsales i.e., Carsales and CapitaLand Investment go up and down completely randomly.
Pair Corralation between Carsales and CapitaLand Investment
Assuming the 90 days trading horizon Carsales is expected to generate 1.06 times more return on investment than CapitaLand Investment. However, Carsales is 1.06 times more volatile than CapitaLand Investment Limited. It trades about 0.39 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about -0.1 per unit of risk. If you would invest 2,280 in Carsales on August 31, 2024 and sell it today you would earn a total of 280.00 from holding Carsales or generate 12.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carsales vs. CapitaLand Investment Limited
Performance |
| Timeline |
| Carsales |
| CapitaLand Investment |
Carsales and CapitaLand Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and CapitaLand Investment
The main advantage of trading using opposite Carsales and CapitaLand Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, CapitaLand Investment 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 CapitaLand Investment will offset losses from the drop in CapitaLand Investment's long position.The idea behind Carsales and CapitaLand Investment Limited 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.| CapitaLand Investment vs. CBRE Group Class | CapitaLand Investment vs. Wharf Real Estate | CapitaLand Investment vs. Superior Plus Corp | CapitaLand Investment vs. NMI Holdings |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |