Correlation Between Carsales and GEELY AUTOMOBILE
Can any of the company-specific risk be diversified away by investing in both Carsales and GEELY AUTOMOBILE 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 GEELY AUTOMOBILE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and GEELY AUTOMOBILE, you can compare the effects of market volatilities on Carsales and GEELY AUTOMOBILE 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 GEELY AUTOMOBILE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and GEELY AUTOMOBILE.
Diversification Opportunities for Carsales and GEELY AUTOMOBILE
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Carsales and GEELY is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and GEELY AUTOMOBILE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEELY AUTOMOBILE 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 GEELY AUTOMOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEELY AUTOMOBILE has no effect on the direction of Carsales i.e., Carsales and GEELY AUTOMOBILE go up and down completely randomly.
Pair Corralation between Carsales and GEELY AUTOMOBILE
Assuming the 90 days trading horizon Carsales is expected to generate 1.52 times more return on investment than GEELY AUTOMOBILE. However, Carsales is 1.52 times more volatile than GEELY AUTOMOBILE. It trades about 0.2 of its potential returns per unit of risk. GEELY AUTOMOBILE is currently generating about 0.06 per unit of risk. If you would invest 2,200 in Carsales on November 4, 2024 and sell it today you would earn a total of 220.00 from holding Carsales or generate 10.0% 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. GEELY AUTOMOBILE
Performance |
| Timeline |
| Carsales |
| GEELY AUTOMOBILE |
Carsales and GEELY AUTOMOBILE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and GEELY AUTOMOBILE
The main advantage of trading using opposite Carsales and GEELY AUTOMOBILE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, GEELY AUTOMOBILE 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 GEELY AUTOMOBILE will offset losses from the drop in GEELY AUTOMOBILE's long position.| Carsales vs. Silicon Motion Technology | Carsales vs. Sekisui Chemical Co | Carsales vs. Mitsui Chemicals | Carsales vs. Eastman Chemical |
| GEELY AUTOMOBILE vs. Molson Coors Beverage | GEELY AUTOMOBILE vs. PLAYMATES TOYS | GEELY AUTOMOBILE vs. US FOODS HOLDING | GEELY AUTOMOBILE vs. PATTIES FOODS |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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