Correlation Between Consolidated Communications and Carsales

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

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

Diversification Opportunities for Consolidated Communications and Carsales

0.28

Correlation Coefficient

Consolidated Communications  Carsales

Modest diversification

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

Pair Corralation between Consolidated Communications and Carsales

Assuming the 90 days horizon Consolidated Communications is expected to generate 2.02 times less return on investment than Carsales. In addition to that, Consolidated Communications is 1.75 times more volatile than Carsales. It trades about 0.02 of its total potential returns per unit of risk. Carsales is currently generating about 0.07 per unit of volatility. If you would invest  1,328  in Carsales on October 6, 2024 and sell it today you would earn a total of  872.00  from holding Carsales or generate 65.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Consolidated Communications Ho  vs.  Carsales

Consolidated Communications

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Consolidated Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Carsales

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Consolidated Communications and Carsales

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

The idea behind Consolidated Communications Holdings and Carsales 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..