Correlation Between PowerHouse Energy and Auto Trader
Can any of the company-specific risk be diversified away by investing in both PowerHouse Energy and Auto Trader 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 PowerHouse Energy and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PowerHouse Energy Group and Auto Trader Group, you can compare the effects of market volatilities on PowerHouse Energy and Auto Trader 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 PowerHouse Energy with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of PowerHouse Energy and Auto Trader.
Diversification Opportunities for PowerHouse Energy and Auto Trader
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PowerHouse and Auto is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding PowerHouse Energy Group and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and PowerHouse Energy 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 PowerHouse Energy Group are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of PowerHouse Energy i.e., PowerHouse Energy and Auto Trader go up and down completely randomly.
Pair Corralation between PowerHouse Energy and Auto Trader
Assuming the 90 days trading horizon PowerHouse Energy Group is expected to generate 2.97 times more return on investment than Auto Trader. However, PowerHouse Energy is 2.97 times more volatile than Auto Trader Group. It trades about 0.01 of its potential returns per unit of risk. Auto Trader Group is currently generating about -0.03 per unit of risk. If you would invest 1.36 in PowerHouse Energy Group on September 16, 2024 and sell it today you would lose (0.04) from holding PowerHouse Energy Group or give up 2.94% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
PowerHouse Energy Group vs. Auto Trader Group
Performance |
Timeline |
PowerHouse Energy |
Auto Trader Group |
PowerHouse Energy and Auto Trader Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PowerHouse Energy and Auto Trader
The main advantage of trading using opposite PowerHouse Energy and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PowerHouse Energy position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.PowerHouse Energy vs. Auto Trader Group | PowerHouse Energy vs. United Utilities Group | PowerHouse Energy vs. Canadian Utilities Limited | PowerHouse Energy vs. Tencent Music Entertainment |
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Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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