Correlation Between YY and Carsales
Can any of the company-specific risk be diversified away by investing in both YY and Carsales 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 YY and Carsales into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between YY Inc Class and CarsalesCom Ltd ADR, you can compare the effects of market volatilities on YY and Carsales 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 YY with a short position of Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of YY and Carsales.
Diversification Opportunities for YY and Carsales
Good diversification
The 3 months correlation between YY and Carsales is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding YY Inc Class and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR and YY 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 YY Inc Class are associated (or correlated) with Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of YY i.e., YY and Carsales go up and down completely randomly.
Pair Corralation between YY and Carsales
Allowing for the 90-day total investment horizon YY Inc Class is expected to under-perform the Carsales. But the stock apears to be less risky and, when comparing its historical volatility, YY Inc Class is 1.28 times less risky than Carsales. The stock trades about 0.0 of its potential returns per unit of risk. The CarsalesCom Ltd ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,196 in CarsalesCom Ltd ADR on August 26, 2024 and sell it today you would earn a total of 167.00 from holding CarsalesCom Ltd ADR or generate 3.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
YY Inc Class vs. CarsalesCom Ltd ADR
Performance |
| Timeline |
| YY Inc Class |
| CarsalesCom ADR |
YY and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with YY and Carsales
The main advantage of trading using opposite YY and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YY position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.The idea behind YY Inc Class and CarsalesCom Ltd ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Carsales vs. Tencent Holdings | Carsales vs. Trivago NV | Carsales vs. YY Inc Class | Carsales vs. DouYu International 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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