Correlation Between Auto Trader and SPORTING

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

By analyzing existing cross correlation between Auto Trader Group and SPORTING, you can compare the effects of market volatilities on Auto Trader and SPORTING 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 Auto Trader with a short position of SPORTING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and SPORTING.

Diversification Opportunities for Auto Trader and SPORTING

0.73

Correlation Coefficient

Auto Trader  SPORTING

Poor diversification

The 3 months correlation between Auto and SPORTING is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and SPORTING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORTING and Auto Trader 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 Auto Trader Group are associated (or correlated) with SPORTING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORTING has no effect on the direction of Auto Trader i.e., Auto Trader and SPORTING go up and down completely randomly.

Pair Corralation between Auto Trader and SPORTING

Assuming the 90 days trading horizon Auto Trader Group is expected to generate 0.51 times more return on investment than SPORTING. However, Auto Trader Group is 1.94 times less risky than SPORTING. It trades about 0.05 of its potential returns per unit of risk. SPORTING is currently generating about 0.0 per unit of risk. If you would invest  807.00  in Auto Trader Group on October 25, 2024 and sell it today you would earn a total of  128.00  from holding Auto Trader Group or generate 15.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Auto Trader Group  vs.  SPORTING

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

SPORTING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPORTING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Auto Trader and SPORTING

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

The idea behind Auto Trader Group and SPORTING 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.