Correlation Between Carsales and Hammerson Plc
Can any of the company-specific risk be diversified away by investing in both Carsales and Hammerson Plc 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 Hammerson Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and Hammerson plc, you can compare the effects of market volatilities on Carsales and Hammerson Plc 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 Hammerson Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Hammerson Plc.
Diversification Opportunities for Carsales and Hammerson Plc
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Carsales and Hammerson is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and Hammerson plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammerson plc 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 Hammerson Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammerson plc has no effect on the direction of Carsales i.e., Carsales and Hammerson Plc go up and down completely randomly.
Pair Corralation between Carsales and Hammerson Plc
Assuming the 90 days trading horizon Carsales is expected to generate 0.81 times more return on investment than Hammerson Plc. However, Carsales is 1.24 times less risky than Hammerson Plc. It trades about 0.49 of its potential returns per unit of risk. Hammerson plc is currently generating about -0.19 per unit of risk. If you would invest 2,260 in Carsales on August 30, 2024 and sell it today you would earn a total of 340.00 from holding Carsales or generate 15.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carsales vs. Hammerson plc
Performance |
| Timeline |
| Carsales |
| Hammerson plc |
Carsales and Hammerson Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Hammerson Plc
The main advantage of trading using opposite Carsales and Hammerson Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, Hammerson Plc 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 Hammerson Plc will offset losses from the drop in Hammerson Plc's long position.| Carsales vs. Performance Food Group | Carsales vs. TreeHouse Foods | Carsales vs. Food Life Companies | Carsales vs. MCEWEN MINING INC |
| Hammerson Plc vs. SBA Communications Corp | Hammerson Plc vs. Salesforce | Hammerson Plc vs. Cogent Communications Holdings | Hammerson Plc vs. Carsales |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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