Correlation Between Cars and Almacenes Xito

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

By analyzing existing cross correlation between Cars Inc and Almacenes xito SA, you can compare the effects of market volatilities on Cars and Almacenes Xito 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 Almacenes Xito. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Almacenes Xito.

Diversification Opportunities for Cars and Almacenes Xito

-0.79

Correlation Coefficient

Cars  Almacenes Xito

Pay attention - limited upside

The 3 months correlation between Cars and Almacenes is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Almacenes xito SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Almacenes xito SA 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 Almacenes Xito. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Almacenes xito SA has no effect on the direction of Cars i.e., Cars and Almacenes Xito go up and down completely randomly.

Pair Corralation between Cars and Almacenes Xito

Given the investment horizon of 90 days Cars Inc is expected to generate 1.07 times more return on investment than Almacenes Xito. However, Cars is 1.07 times more volatile than Almacenes xito SA. It trades about 0.0 of its potential returns per unit of risk. Almacenes xito SA is currently generating about -0.1 per unit of risk. If you would invest  1,884  in Cars Inc on September 23, 2024 and sell it today you would lose (138.00) from holding Cars Inc or give up 7.32% of portfolio value over 90 days.

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

Cars Inc  vs.  Almacenes xito SA

Cars Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Almacenes xito SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Almacenes xito SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Almacenes Xito is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cars and Almacenes Xito

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

The idea behind Cars Inc and Almacenes xito 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.