Correlation Between AIRBNB INC and CarsalesCom

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

By analyzing existing cross correlation between AIRBNB INC DL 01 and CarsalesCom, you can compare the effects of market volatilities on AIRBNB INC and CarsalesCom 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 AIRBNB INC with a short position of CarsalesCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIRBNB INC and CarsalesCom.

Diversification Opportunities for AIRBNB INC and CarsalesCom

0.59

Correlation Coefficient

AIRBNB INC  CarsalesCom

Very weak diversification

The 3 months correlation between AIRBNB and CarsalesCom is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding AIRBNB INC DL 01 and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom and AIRBNB INC 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 AIRBNB INC DL 01 are associated (or correlated) with CarsalesCom. 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 AIRBNB INC i.e., AIRBNB INC and CarsalesCom go up and down completely randomly.

Pair Corralation between AIRBNB INC and CarsalesCom

Assuming the 90 days horizon AIRBNB INC is expected to generate 1.14 times less return on investment than CarsalesCom. In addition to that, AIRBNB INC is 1.76 times more volatile than CarsalesCom. It trades about 0.04 of its total potential returns per unit of risk. CarsalesCom is currently generating about 0.08 per unit of volatility. If you would invest  1,227  in CarsalesCom on September 29, 2024 and sell it today you would earn a total of  993.00  from holding CarsalesCom or generate 80.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

AIRBNB INC DL 01  vs.  CarsalesCom

AIRBNB INC DL

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AIRBNB INC DL 01 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AIRBNB INC reported solid returns over the last few months and may actually be approaching a breakup point.

CarsalesCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CarsalesCom is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AIRBNB INC and CarsalesCom

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

The idea behind AIRBNB INC DL 01 and CarsalesCom 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.

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 Valuation module to check real value of public entities based on technical and fundamental data.