Correlation Between Cars and Joint Corp

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

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

Diversification Opportunities for Cars and Joint Corp

0.57

Correlation Coefficient

Cars  Joint Corp

Very weak diversification

The 3 months correlation between Cars and Joint is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and The Joint Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Corp 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 Joint Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Corp has no effect on the direction of Cars i.e., Cars and Joint Corp go up and down completely randomly.

Pair Corralation between Cars and Joint Corp

Given the investment horizon of 90 days Cars Inc is expected to generate 1.09 times more return on investment than Joint Corp. However, Cars is 1.09 times more volatile than The Joint Corp. It trades about 0.01 of its potential returns per unit of risk. The Joint Corp is currently generating about -0.02 per unit of risk. If you would invest  1,935  in Cars Inc on September 13, 2024 and sell it today you would lose (1.00) from holding Cars Inc or give up 0.05% of portfolio value over 90 days.

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

Cars Inc  vs.  The Joint Corp

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.

Joint Corp

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days The Joint Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Joint Corp 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 Joint Corp

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

The idea behind Cars Inc and The Joint Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.