Correlation Between MYFAIR GOLD and Cars

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

By analyzing existing cross correlation between MYFAIR GOLD P and Cars Inc, you can compare the effects of market volatilities on MYFAIR GOLD and Cars 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 MYFAIR GOLD with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of MYFAIR GOLD and Cars.

Diversification Opportunities for MYFAIR GOLD and Cars

-0.48

Correlation Coefficient

MYFAIR GOLD  Cars

Very good diversification

The 3 months correlation between MYFAIR and Cars is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding MYFAIR GOLD P and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and MYFAIR GOLD 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 MYFAIR GOLD P are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of MYFAIR GOLD i.e., MYFAIR GOLD and Cars go up and down completely randomly.

Pair Corralation between MYFAIR GOLD and Cars

Assuming the 90 days horizon MYFAIR GOLD P is expected to generate 2.12 times more return on investment than Cars. However, MYFAIR GOLD is 2.12 times more volatile than Cars Inc. It trades about -0.08 of its potential returns per unit of risk. Cars Inc is currently generating about -0.25 per unit of risk. If you would invest  124.00  in MYFAIR GOLD P on September 24, 2024 and sell it today you would lose (10.00) from holding MYFAIR GOLD P or give up 8.06% of portfolio value over 90 days.

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

MYFAIR GOLD P  vs.  Cars Inc

MYFAIR GOLD P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cars Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cars may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MYFAIR GOLD and Cars

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

The idea behind MYFAIR GOLD P and Cars Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.