Correlation Between Carsales and VARIOUS EATERIES
Can any of the company-specific risk be diversified away by investing in both Carsales and VARIOUS EATERIES 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 VARIOUS EATERIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and VARIOUS EATERIES LS, you can compare the effects of market volatilities on Carsales and VARIOUS EATERIES 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 VARIOUS EATERIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and VARIOUS EATERIES.
Diversification Opportunities for Carsales and VARIOUS EATERIES
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Carsales and VARIOUS is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and VARIOUS EATERIES LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VARIOUS EATERIES 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 VARIOUS EATERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VARIOUS EATERIES has no effect on the direction of Carsales i.e., Carsales and VARIOUS EATERIES go up and down completely randomly.
Pair Corralation between Carsales and VARIOUS EATERIES
Assuming the 90 days trading horizon Carsales is expected to under-perform the VARIOUS EATERIES. But the stock apears to be less risky and, when comparing its historical volatility, Carsales is 1.21 times less risky than VARIOUS EATERIES. The stock trades about -0.49 of its potential returns per unit of risk. The VARIOUS EATERIES LS is currently generating about -0.32 of returns per unit of risk over similar time horizon. If you would invest 21.00 in VARIOUS EATERIES LS on September 24, 2024 and sell it today you would lose (2.00) from holding VARIOUS EATERIES LS or give up 9.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carsales vs. VARIOUS EATERIES LS
Performance |
| Timeline |
| Carsales |
| VARIOUS EATERIES |
Carsales and VARIOUS EATERIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and VARIOUS EATERIES
The main advantage of trading using opposite Carsales and VARIOUS EATERIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, VARIOUS EATERIES 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 VARIOUS EATERIES will offset losses from the drop in VARIOUS EATERIES's long position.The idea behind Carsales and VARIOUS EATERIES LS 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.| VARIOUS EATERIES vs. PSI Software AG | VARIOUS EATERIES vs. Aegean Airlines SA | VARIOUS EATERIES vs. CyberArk Software | VARIOUS EATERIES vs. AXWAY SOFTWARE EO |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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