Correlation Between AOYAMA TRADING and Carsales

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

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

Diversification Opportunities for AOYAMA TRADING and Carsales

0.85

Correlation Coefficient

AOYAMA TRADING  Carsales

Very poor diversification

The 3 months correlation between AOYAMA and Carsales is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding AOYAMA TRADING and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom and AOYAMA TRADING 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 AOYAMA TRADING 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 AOYAMA TRADING i.e., AOYAMA TRADING and Carsales go up and down completely randomly.

Pair Corralation between AOYAMA TRADING and Carsales

Assuming the 90 days horizon AOYAMA TRADING is expected to generate 6.67 times more return on investment than Carsales. However, AOYAMA TRADING is 6.67 times more volatile than CarsalesCom. It trades about 0.39 of its potential returns per unit of risk. CarsalesCom is currently generating about 0.49 per unit of risk. If you would invest  790.00  in AOYAMA TRADING on September 3, 2024 and sell it today you would earn a total of  620.00  from holding AOYAMA TRADING or generate 78.48% return on investment over 90 days.

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

AOYAMA TRADING  vs.  CarsalesCom

AOYAMA TRADING

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AOYAMA TRADING are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AOYAMA TRADING reported solid returns over the last few months and may actually be approaching a breakup point.

CarsalesCom

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Carsales reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AOYAMA TRADING and Carsales

The main advantage of trading using opposite AOYAMA TRADING and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AOYAMA TRADING 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.

The idea behind AOYAMA TRADING 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.