Correlation Between ASSOC BR and CARSALES

Can any of the company-specific risk be diversified away by investing in both ASSOC BR 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 ASSOC BR and CARSALES 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 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 ASSOC BR with a short position of CARSALES. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASSOC BR and CARSALES.

Diversification Opportunities for ASSOC BR and CARSALES

0.05

Correlation Coefficient

ASSOC BR  CARSALES

Significant diversification

The 3 months correlation between ASSOC and CARSALES is 0.05. 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 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 ASSOC BR i.e., ASSOC BR and CARSALES go up and down completely randomly.

Pair Corralation between ASSOC BR and CARSALES

Assuming the 90 days trading horizon ASSOC BR FOODS is expected to generate 0.86 times more return on investment than CARSALES. However, ASSOC BR FOODS is 1.16 times less risky than CARSALES. It trades about -0.05 of its potential returns per unit of risk. CARSALESCOM is currently generating about -0.12 per unit of risk. If you would invest  2,440  in ASSOC BR FOODS on December 30, 2024 and sell it today you would lose (140.00) from holding ASSOC BR FOODS or give up 5.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
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 nearly stable basic indicators, ASSOC BR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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 fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ASSOC BR and CARSALES

The main advantage of trading using opposite ASSOC BR and CARSALES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASSOC BR 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'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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..