Correlation Between American Woodmark and CARSALESCOM

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Can any of the company-specific risk be diversified away by investing in both American Woodmark 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 American Woodmark and CARSALESCOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Woodmark and CARSALESCOM, you can compare the effects of market volatilities on American Woodmark 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 American Woodmark with a short position of CARSALESCOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Woodmark and CARSALESCOM.

Diversification Opportunities for American Woodmark and CARSALESCOM

AmericanCARSALESCOMDiversified AwayAmericanCARSALESCOMDiversified Away100%
0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between American and CARSALESCOM is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding American Woodmark and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM and American Woodmark 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 American Woodmark 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 American Woodmark i.e., American Woodmark and CARSALESCOM go up and down completely randomly.

Pair Corralation between American Woodmark and CARSALESCOM

Assuming the 90 days horizon American Woodmark is expected to under-perform the CARSALESCOM. In addition to that, American Woodmark is 1.33 times more volatile than CARSALESCOM. It trades about -0.12 of its total potential returns per unit of risk. CARSALESCOM is currently generating about 0.0 per unit of volatility. If you would invest  2,320  in CARSALESCOM on October 21, 2024 and sell it today you would lose (20.00) from holding CARSALESCOM or give up 0.86% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

American Woodmark  vs.  CARSALESCOM

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -10-5051015
JavaScript chart by amCharts 3.21.15AHQ WN6
       Timeline  
American Woodmark 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days American Woodmark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan7580859095
CARSALESCOM 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan21.52222.52323.52424.52525.526

American Woodmark and CARSALESCOM Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.59-2.69-1.79-0.89-0.01460.851.732.613.484.36 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15AHQ WN6
       Returns  

Pair Trading with American Woodmark and CARSALESCOM

The main advantage of trading using opposite American Woodmark and CARSALESCOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Woodmark 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 American Woodmark 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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