Correlation Between Autosports and Predictive Discovery

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

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

Diversification Opportunities for Autosports and Predictive Discovery

0.74

Correlation Coefficient

Autosports  Predictive Discovery

Poor diversification

The 3 months correlation between Autosports and Predictive is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Autosports Group and Predictive Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Predictive Discovery and Autosports 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 Autosports Group are associated (or correlated) with Predictive Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Predictive Discovery has no effect on the direction of Autosports i.e., Autosports and Predictive Discovery go up and down completely randomly.

Pair Corralation between Autosports and Predictive Discovery

Assuming the 90 days trading horizon Autosports Group is expected to under-perform the Predictive Discovery. But the stock apears to be less risky and, when comparing its historical volatility, Autosports Group is 2.43 times less risky than Predictive Discovery. The stock trades about -0.14 of its potential returns per unit of risk. The Predictive Discovery is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Predictive Discovery on October 10, 2024 and sell it today you would earn a total of  1.00  from holding Predictive Discovery or generate 4.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Autosports Group  vs.  Predictive Discovery

Autosports Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Autosports Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Predictive Discovery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Predictive Discovery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Predictive Discovery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Autosports and Predictive Discovery

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

The idea behind Autosports Group and Predictive Discovery 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.