Correlation Between Cars and OneSavings Bank

Can any of the company-specific risk be diversified away by investing in both Cars and OneSavings Bank 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 Cars and OneSavings Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cars Inc and OneSavings Bank PLC, you can compare the effects of market volatilities on Cars and OneSavings Bank 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 Cars with a short position of OneSavings Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and OneSavings Bank.

Diversification Opportunities for Cars and OneSavings Bank

0.43

Correlation Coefficient

Cars  OneSavings Bank

Very weak diversification

The 3 months correlation between Cars and OneSavings is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and OneSavings Bank PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OneSavings Bank PLC and Cars 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 Cars Inc are associated (or correlated) with OneSavings Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OneSavings Bank PLC has no effect on the direction of Cars i.e., Cars and OneSavings Bank go up and down completely randomly.

Pair Corralation between Cars and OneSavings Bank

Assuming the 90 days trading horizon Cars Inc is expected to generate 1.48 times more return on investment than OneSavings Bank. However, Cars is 1.48 times more volatile than OneSavings Bank PLC. It trades about 0.1 of its potential returns per unit of risk. OneSavings Bank PLC is currently generating about 0.06 per unit of risk. If you would invest  1,596  in Cars Inc on October 25, 2024 and sell it today you would earn a total of  177.00  from holding Cars Inc or generate 11.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	65.57%
Values	Daily Returns

Cars Inc  vs.  OneSavings Bank PLC

Cars Inc

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Cars unveiled solid returns over the last few months and may actually be approaching a breakup point.

OneSavings Bank PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OneSavings Bank PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, OneSavings Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cars and OneSavings Bank

The main advantage of trading using opposite Cars and OneSavings Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, OneSavings Bank 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 OneSavings Bank will offset losses from the drop in OneSavings Bank's long position.

The idea behind Cars Inc and OneSavings Bank PLC 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.