Correlation Between Automotive Finco and Precious Metals

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

By analyzing existing cross correlation between Automotive Finco Corp and Precious Metals And, you can compare the effects of market volatilities on Automotive Finco and Precious Metals 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 Automotive Finco with a short position of Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automotive Finco and Precious Metals.

Diversification Opportunities for Automotive Finco and Precious Metals

0.08

Correlation Coefficient

Automotive Finco  Precious Metals

Significant diversification

The 3 months correlation between Automotive and Precious is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Automotive Finco Corp and Precious Metals And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals And and Automotive Finco 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 Automotive Finco Corp are associated (or correlated) with Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals And has no effect on the direction of Automotive Finco i.e., Automotive Finco and Precious Metals go up and down completely randomly.

Pair Corralation between Automotive Finco and Precious Metals

Assuming the 90 days trading horizon Automotive Finco Corp is expected to generate 1.79 times more return on investment than Precious Metals. However, Automotive Finco is 1.79 times more volatile than Precious Metals And. It trades about 0.05 of its potential returns per unit of risk. Precious Metals And is currently generating about -0.08 per unit of risk. If you would invest  86.00  in Automotive Finco Corp on October 9, 2024 and sell it today you would earn a total of  2.00  from holding Automotive Finco Corp or generate 2.33% return on investment over 90 days.

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

Automotive Finco Corp  vs.  Precious Metals And

Automotive Finco Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Automotive Finco Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Automotive Finco sustained solid returns over the last few months and may actually be approaching a breakup point.

Precious Metals And

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Precious Metals And are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Precious Metals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Automotive Finco and Precious Metals

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

The idea behind Automotive Finco Corp and Precious Metals And 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.