Correlation Between INTER CARS and COMMONWBK AUSTRSPADRS

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

By analyzing existing cross correlation between INTER CARS SA and COMMONWBK AUSTRSPADRS, you can compare the effects of market volatilities on INTER CARS and COMMONWBK AUSTRSPADRS 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 INTER CARS with a short position of COMMONWBK AUSTRSPADRS. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTER CARS and COMMONWBK AUSTRSPADRS.

Diversification Opportunities for INTER CARS and COMMONWBK AUSTRSPADRS

0.15

Correlation Coefficient

INTER CARS  COMMONWBK AUSTRSPADRS

Average diversification

The 3 months correlation between INTER and COMMONWBK is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding INTER CARS SA and COMMONWBK AUSTRSPADRS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMONWBK AUSTRSPADRS and INTER 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 INTER CARS SA are associated (or correlated) with COMMONWBK AUSTRSPADRS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMONWBK AUSTRSPADRS has no effect on the direction of INTER CARS i.e., INTER CARS and COMMONWBK AUSTRSPADRS go up and down completely randomly.

Pair Corralation between INTER CARS and COMMONWBK AUSTRSPADRS

Assuming the 90 days horizon INTER CARS SA is expected to generate 1.39 times more return on investment than COMMONWBK AUSTRSPADRS. However, INTER CARS is 1.39 times more volatile than COMMONWBK AUSTRSPADRS. It trades about 0.19 of its potential returns per unit of risk. COMMONWBK AUSTRSPADRS is currently generating about -0.02 per unit of risk. If you would invest  11,200  in INTER CARS SA on November 29, 2024 and sell it today you would earn a total of  2,760  from holding INTER CARS SA or generate 24.64% return on investment over 90 days.

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

INTER CARS SA  vs.  COMMONWBK AUSTRSPADRS

INTER CARS SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INTER CARS reported solid returns over the last few months and may actually be approaching a breakup point.

COMMONWBK AUSTRSPADRS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with INTER CARS and COMMONWBK AUSTRSPADRS

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

The idea behind INTER CARS SA and COMMONWBK AUSTRSPADRS 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.