Correlation Between Carsales and State Street
Can any of the company-specific risk be diversified away by investing in both Carsales and State Street 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 State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and State Street, you can compare the effects of market volatilities on Carsales and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and State Street.
Diversification Opportunities for Carsales and State Street
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Carsales and State is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of Carsales i.e., Carsales and State Street go up and down completely randomly.
Pair Corralation between Carsales and State Street
Assuming the 90 days trading horizon Carsales is expected to generate 0.97 times more return on investment than State Street. However, Carsales is 1.03 times less risky than State Street. It trades about 0.1 of its potential returns per unit of risk. State Street is currently generating about 0.04 per unit of risk. If you would invest 1,273 in Carsales on September 3, 2024 and sell it today you would earn a total of 1,267 from holding Carsales or generate 99.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carsales vs. State Street
Performance |
| Timeline |
| Carsales |
| State Street |
Carsales and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and State Street
The main advantage of trading using opposite Carsales and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| Carsales vs. Thai Beverage Public | Carsales vs. Premier Foods PLC | Carsales vs. Food Life Companies | Carsales vs. CN MODERN DAIRY |
| State Street vs. GRUPO CARSO A1 | State Street vs. COMPUTERSHARE | State Street vs. Geely Automobile Holdings | State Street vs. Consolidated Communications 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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