Correlation Between ASSOC BR and CARSALESCOM

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

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

Diversification Opportunities for ASSOC BR and CARSALESCOM

0.31

Correlation Coefficient

ASSOC BR  CARSALESCOM

Weak diversification

The 3 months correlation between ASSOC and CARSALESCOM is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding ASSOC BR FOODS and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM and ASSOC BR 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 ASSOC BR FOODS are associated (or correlated) with CARSALESCOM. 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 ASSOC BR i.e., ASSOC BR and CARSALESCOM go up and down completely randomly.

Pair Corralation between ASSOC BR and CARSALESCOM

Assuming the 90 days trading horizon ASSOC BR FOODS is expected to under-perform the CARSALESCOM. But the stock apears to be less risky and, when comparing its historical volatility, ASSOC BR FOODS is 1.17 times less risky than CARSALESCOM. The stock trades about -0.17 of its potential returns per unit of risk. The CARSALESCOM is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  2,400  in CARSALESCOM on December 6, 2024 and sell it today you would lose (280.00) from holding CARSALESCOM or give up 11.67% of portfolio value over 90 days.

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

ASSOC BR FOODS  vs.  CARSALESCOM

ASSOC BR FOODS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASSOC BR FOODS 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CARSALESCOM

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with ASSOC BR and CARSALESCOM

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

The idea behind ASSOC BR FOODS 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.