Correlation Between Automotive Stampings and Cartrade Tech

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

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

Diversification Opportunities for Automotive Stampings and Cartrade Tech

-0.16

Correlation Coefficient

Automotive Stampings  Cartrade Tech

Good diversification

The 3 months correlation between Automotive and Cartrade is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Automotive Stampings and and Cartrade Tech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cartrade Tech Limited and Automotive Stampings 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 Stampings and are associated (or correlated) with Cartrade Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cartrade Tech Limited has no effect on the direction of Automotive Stampings i.e., Automotive Stampings and Cartrade Tech go up and down completely randomly.

Pair Corralation between Automotive Stampings and Cartrade Tech

Assuming the 90 days trading horizon Automotive Stampings is expected to generate 1.28 times less return on investment than Cartrade Tech. In addition to that, Automotive Stampings is 1.25 times more volatile than Cartrade Tech Limited. It trades about 0.05 of its total potential returns per unit of risk. Cartrade Tech Limited is currently generating about 0.09 per unit of volatility. If you would invest  80,175  in Cartrade Tech Limited on October 21, 2024 and sell it today you would earn a total of  67,050  from holding Cartrade Tech Limited or generate 83.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.3%
Values	Daily Returns

Automotive Stampings and  vs.  Cartrade Tech Limited

Automotive Stampings and

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Automotive Stampings and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Automotive Stampings is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Cartrade Tech Limited

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cartrade Tech Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Cartrade Tech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automotive Stampings and Cartrade Tech

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

The idea behind Automotive Stampings and and Cartrade Tech Limited 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.