Correlation Between GAMING FAC and Carsales

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

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

Diversification Opportunities for GAMING FAC and Carsales

-0.25

Correlation Coefficient

GAMING FAC  Carsales

Very good diversification

The 3 months correlation between GAMING and Carsales is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding GAMING FAC SA and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales and GAMING FAC 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 GAMING FAC SA 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 Carsales has no effect on the direction of GAMING FAC i.e., GAMING FAC and Carsales go up and down completely randomly.

Pair Corralation between GAMING FAC and Carsales

Assuming the 90 days horizon GAMING FAC SA is expected to under-perform the Carsales. In addition to that, GAMING FAC is 2.03 times more volatile than Carsales. It trades about -0.02 of its total potential returns per unit of risk. Carsales is currently generating about 0.07 per unit of volatility. If you would invest  1,596  in Carsales on September 26, 2024 and sell it today you would earn a total of  624.00  from holding Carsales or generate 39.1% return on investment over 90 days.

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

GAMING FAC SA  vs.  Carsales

GAMING FAC SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMING FAC SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Carsales

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carsales has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Carsales is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GAMING FAC and Carsales

The main advantage of trading using opposite GAMING FAC and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GAMING FAC 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 GAMING FAC SA and Carsales 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.