Correlation Between Carsales and Atea ASA
Can any of the company-specific risk be diversified away by investing in both Carsales and Atea ASA 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 Atea ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and Atea ASA, you can compare the effects of market volatilities on Carsales and Atea ASA 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 Atea ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Atea ASA.
Diversification Opportunities for Carsales and Atea ASA
Poor diversification
The 3 months correlation between Carsales and Atea is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and Atea ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea ASA 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 Atea ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea ASA has no effect on the direction of Carsales i.e., Carsales and Atea ASA go up and down completely randomly.
Pair Corralation between Carsales and Atea ASA
Assuming the 90 days trading horizon Carsales is expected to under-perform the Atea ASA. But the stock apears to be less risky and, when comparing its historical volatility, Carsales is 6.15 times less risky than Atea ASA. The stock trades about -0.15 of its potential returns per unit of risk. The Atea ASA is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 798.00 in Atea ASA on September 13, 2024 and sell it today you would earn a total of 404.00 from holding Atea ASA or generate 50.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carsales vs. Atea ASA
Performance |
| Timeline |
| Carsales |
| Atea ASA |
Carsales and Atea ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Atea ASA
The main advantage of trading using opposite Carsales and Atea ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, Atea ASA 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 Atea ASA will offset losses from the drop in Atea ASA's long position.The idea behind Carsales and Atea ASA 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.| Atea ASA vs. GALENA MINING LTD | Atea ASA vs. BANKINTER ADR 2007 | Atea ASA vs. Perseus Mining Limited | Atea ASA vs. SERI INDUSTRIAL 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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