Correlation Between AutoCanada and Cango

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

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

Diversification Opportunities for AutoCanada and Cango

0.28

Correlation Coefficient

AutoCanada  Cango

Modest diversification

The 3 months correlation between AutoCanada and Cango is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding AutoCanada and Cango Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cango Inc and AutoCanada 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 AutoCanada are associated (or correlated) with Cango. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cango Inc has no effect on the direction of AutoCanada i.e., AutoCanada and Cango go up and down completely randomly.

Pair Corralation between AutoCanada and Cango

Assuming the 90 days horizon AutoCanada is expected to generate 0.49 times more return on investment than Cango. However, AutoCanada is 2.03 times less risky than Cango. It trades about -0.02 of its potential returns per unit of risk. Cango Inc is currently generating about -0.03 per unit of risk. If you would invest  1,187  in AutoCanada on December 29, 2024 and sell it today you would lose (52.00) from holding AutoCanada or give up 4.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.16%
Values	Daily Returns

AutoCanada  vs.  Cango Inc

AutoCanada

Risk-Adjusted Performance

Very Weak

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

Cango Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cango Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AutoCanada and Cango

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

The idea behind AutoCanada and Cango 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.