Correlation Between AUTO TRADER and Carsales
Can any of the company-specific risk be diversified away by investing in both AUTO TRADER 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 AUTO TRADER and Carsales into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AUTO TRADER ADR and CarsalesCom, you can compare the effects of market volatilities on AUTO TRADER 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 AUTO TRADER with a short position of Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUTO TRADER and Carsales.
Diversification Opportunities for AUTO TRADER and Carsales
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AUTO and Carsales is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding AUTO TRADER ADR and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 ADR 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 has no effect on the direction of AUTO TRADER i.e., AUTO TRADER and Carsales go up and down completely randomly.
Pair Corralation between AUTO TRADER and Carsales
Assuming the 90 days trading horizon AUTO TRADER ADR is expected to generate 0.84 times more return on investment than Carsales. However, AUTO TRADER ADR is 1.2 times less risky than Carsales. It trades about -0.35 of its potential returns per unit of risk. CarsalesCom is currently generating about -0.49 per unit of risk. If you would invest 249.00 in AUTO TRADER ADR on October 10, 2024 and sell it today you would lose (15.00) from holding AUTO TRADER ADR or give up 6.02% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
AUTO TRADER ADR vs. CarsalesCom
Performance |
Timeline |
AUTO TRADER ADR |
CarsalesCom |
AUTO TRADER and Carsales Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AUTO TRADER and Carsales
The main advantage of trading using opposite AUTO TRADER and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUTO TRADER 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.AUTO TRADER vs. Goodyear Tire Rubber | AUTO TRADER vs. Hyrican Informationssysteme Aktiengesellschaft | AUTO TRADER vs. VULCAN MATERIALS | AUTO TRADER vs. APPLIED MATERIALS |
Carsales vs. FLOW TRADERS LTD | Carsales vs. Retail Estates NV | Carsales vs. National Retail Properties | Carsales vs. H2O Retailing |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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