Correlation Between Carsales and TRADEGATE
Can any of the company-specific risk be diversified away by investing in both Carsales and TRADEGATE 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 TRADEGATE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and TRADEGATE, you can compare the effects of market volatilities on Carsales and TRADEGATE 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 TRADEGATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and TRADEGATE.
Diversification Opportunities for Carsales and TRADEGATE
Very weak diversification
The 3 months correlation between Carsales and TRADEGATE is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and TRADEGATE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRADEGATE 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 TRADEGATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRADEGATE has no effect on the direction of Carsales i.e., Carsales and TRADEGATE go up and down completely randomly.
Pair Corralation between Carsales and TRADEGATE
Assuming the 90 days trading horizon Carsales is expected to generate 1.93 times more return on investment than TRADEGATE. However, Carsales is 1.93 times more volatile than TRADEGATE. It trades about 0.08 of its potential returns per unit of risk. TRADEGATE is currently generating about -0.04 per unit of risk. If you would invest 1,346 in Carsales on November 9, 2024 and sell it today you would earn a total of 1,074 from holding Carsales or generate 79.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carsales vs. TRADEGATE
Performance |
| Timeline |
| Carsales |
| TRADEGATE |
Carsales and TRADEGATE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and TRADEGATE
The main advantage of trading using opposite Carsales and TRADEGATE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, TRADEGATE 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 TRADEGATE will offset losses from the drop in TRADEGATE's long position.| Carsales vs. SINGAPORE AIRLINES | Carsales vs. SOLSTAD OFFSHORE NK | Carsales vs. United Airlines Holdings | Carsales vs. AEGEAN AIRLINES |
| TRADEGATE vs. Fukuyama Transporting Co | TRADEGATE vs. DICKS Sporting Goods | TRADEGATE vs. Gaztransport Technigaz SA | TRADEGATE vs. SCIENCE IN SPORT |
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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