Correlation Between Cars and AMCON Distributing

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

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

Diversification Opportunities for Cars and AMCON Distributing

-0.18

Correlation Coefficient

Cars  AMCON Distributing

Good diversification

The 3 months correlation between Cars and AMCON is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and AMCON Distributing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMCON Distributing and 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 Cars Inc are associated (or correlated) with AMCON Distributing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMCON Distributing has no effect on the direction of Cars i.e., Cars and AMCON Distributing go up and down completely randomly.

Pair Corralation between Cars and AMCON Distributing

Given the investment horizon of 90 days Cars is expected to generate 53.56 times less return on investment than AMCON Distributing. But when comparing it to its historical volatility, Cars Inc is 2.36 times less risky than AMCON Distributing. It trades about 0.01 of its potential returns per unit of risk. AMCON Distributing is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  12,100  in AMCON Distributing on September 13, 2024 and sell it today you would earn a total of  1,800  from holding AMCON Distributing or generate 14.88% return on investment over 90 days.

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

Cars Inc  vs.  AMCON Distributing

Cars Inc

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Cars may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AMCON Distributing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cars and AMCON Distributing

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

The idea behind Cars Inc and AMCON Distributing 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.