Correlation Between Carsales and Computershare
Can any of the company-specific risk be diversified away by investing in both Carsales and Computershare 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 Computershare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and Computershare Limited, you can compare the effects of market volatilities on Carsales and Computershare 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 Computershare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Computershare.
Diversification Opportunities for Carsales and Computershare
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Carsales and Computershare is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and Computershare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computershare Limited 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 Computershare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computershare Limited has no effect on the direction of Carsales i.e., Carsales and Computershare go up and down completely randomly.
Pair Corralation between Carsales and Computershare
Assuming the 90 days trading horizon Carsales is expected to generate 0.99 times more return on investment than Computershare. However, Carsales is 1.01 times less risky than Computershare. It trades about 0.09 of its potential returns per unit of risk. Computershare Limited is currently generating about 0.04 per unit of risk. If you would invest 1,282 in Carsales on September 3, 2024 and sell it today you would earn a total of 1,258 from holding Carsales or generate 98.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carsales vs. Computershare Limited
Performance |
| Timeline |
| Carsales |
| Computershare Limited |
Carsales and Computershare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Computershare
The main advantage of trading using opposite Carsales and Computershare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, Computershare 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 Computershare will offset losses from the drop in Computershare's long position.| Carsales vs. Thai Beverage Public | Carsales vs. Premier Foods PLC | Carsales vs. Food Life Companies | Carsales vs. CN MODERN DAIRY |
| Computershare vs. International Business Machines | Computershare vs. FUJITSU LTD ADR | Computershare vs. Superior Plus Corp | Computershare 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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