Correlation Between Carsales and CarsalesCom
Can any of the company-specific risk be diversified away by investing in both Carsales and CarsalesCom 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 CarsalesCom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and CarsalesCom, you can compare the effects of market volatilities on Carsales and CarsalesCom 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 CarsalesCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and CarsalesCom.
Diversification Opportunities for Carsales and CarsalesCom
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Carsales and CarsalesCom is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Carsales i.e., Carsales and CarsalesCom go up and down completely randomly.
Pair Corralation between Carsales and CarsalesCom
Assuming the 90 days trading horizon Carsales is expected to generate 1.01 times more return on investment than CarsalesCom. However, Carsales is 1.01 times more volatile than CarsalesCom. It trades about 0.48 of its potential returns per unit of risk. CarsalesCom is currently generating about 0.46 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 Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Carsales vs. CarsalesCom
Performance |
| Timeline |
| Carsales |
| CarsalesCom |
Carsales and CarsalesCom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and CarsalesCom
The main advantage of trading using opposite Carsales and CarsalesCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, CarsalesCom 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 CarsalesCom will offset losses from the drop in CarsalesCom's long position.| Carsales vs. MI Homes | Carsales vs. Aedas Homes SA | Carsales vs. Zoom Video Communications | Carsales vs. Infrastrutture Wireless Italiane |
| CarsalesCom vs. Transport International Holdings | CarsalesCom vs. Verizon Communications | CarsalesCom vs. Gamma Communications plc | CarsalesCom vs. SPORT LISBOA E |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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