Correlation Between Carsales and Terex
Can any of the company-specific risk be diversified away by investing in both Carsales and Terex 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 Terex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and Terex, you can compare the effects of market volatilities on Carsales and Terex 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 Terex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Terex.
Diversification Opportunities for Carsales and Terex
Very poor diversification
The 3 months correlation between Carsales and Terex is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and Terex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terex 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 Terex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terex has no effect on the direction of Carsales i.e., Carsales and Terex go up and down completely randomly.
Pair Corralation between Carsales and Terex
Assuming the 90 days trading horizon Carsales is expected to generate 0.62 times more return on investment than Terex. However, Carsales is 1.62 times less risky than Terex. It trades about 0.08 of its potential returns per unit of risk. Terex is currently generating about 0.0 per unit of risk. If you would invest 1,254 in Carsales on December 4, 2024 and sell it today you would earn a total of 946.00 from holding Carsales or generate 75.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Carsales vs. Terex
Performance |
| Timeline |
| Carsales |
| Terex |
Carsales and Terex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Terex
The main advantage of trading using opposite Carsales and Terex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, Terex 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 Terex will offset losses from the drop in Terex's long position.| Carsales vs. CODERE ONLINE LUX | Carsales vs. InPlay Oil Corp | Carsales vs. ZhongAn Online P | Carsales vs. Salesforce |
| Terex vs. BORR DRILLING NEW | Terex vs. FIREWEED METALS P | Terex vs. Ultra Clean Holdings | Terex vs. PRECISION DRILLING P |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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