Correlation Between Inter Cars and Tower Investments

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

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

Diversification Opportunities for Inter Cars and Tower Investments

0.74

Correlation Coefficient

Inter Cars  Tower Investments

Poor diversification

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

Pair Corralation between Inter Cars and Tower Investments

Assuming the 90 days trading horizon Inter Cars is expected to generate 2.46 times less return on investment than Tower Investments. But when comparing it to its historical volatility, Inter Cars SA is 3.55 times less risky than Tower Investments. It trades about 0.02 of its potential returns per unit of risk. Tower Investments SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  262.00  in Tower Investments SA on December 30, 2024 and sell it today you would lose (14.00) from holding Tower Investments SA or give up 5.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Inter Cars SA  vs.  Tower Investments SA

Inter Cars SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Cars SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Inter Cars is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Tower Investments

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Investments SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Tower Investments is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Inter Cars and Tower Investments

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

The idea behind Inter Cars SA and Tower Investments SA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.