Correlation Between SIDETRADE and Auto Trader

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

By analyzing existing cross correlation between SIDETRADE EO 1 and Auto Trader Group, you can compare the effects of market volatilities on SIDETRADE and Auto Trader 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 SIDETRADE with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIDETRADE and Auto Trader.

Diversification Opportunities for SIDETRADE and Auto Trader

-0.03

Correlation Coefficient

SIDETRADE  Auto Trader

Good diversification

The 3 months correlation between SIDETRADE and Auto is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding SIDETRADE EO 1 and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and SIDETRADE 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 SIDETRADE EO 1 are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of SIDETRADE i.e., SIDETRADE and Auto Trader go up and down completely randomly.

Pair Corralation between SIDETRADE and Auto Trader

Assuming the 90 days horizon SIDETRADE is expected to generate 1.06 times less return on investment than Auto Trader. In addition to that, SIDETRADE is 1.35 times more volatile than Auto Trader Group. It trades about 0.05 of its total potential returns per unit of risk. Auto Trader Group is currently generating about 0.07 per unit of volatility. If you would invest  609.00  in Auto Trader Group on October 4, 2024 and sell it today you would earn a total of  346.00  from holding Auto Trader Group or generate 56.81% return on investment over 90 days.

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

SIDETRADE EO 1  vs.  Auto Trader Group

SIDETRADE EO 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIDETRADE EO 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SIDETRADE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 rather sound basic indicators, Auto Trader is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SIDETRADE and Auto Trader

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

The idea behind SIDETRADE EO 1 and Auto Trader Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.