Correlation Between Cars and Saia

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

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

Diversification Opportunities for Cars and Saia

0.83

Correlation Coefficient

Cars  Saia

Very poor diversification

The 3 months correlation between Cars and Saia is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Saia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saia Inc 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 Saia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saia Inc has no effect on the direction of Cars i.e., Cars and Saia go up and down completely randomly.

Pair Corralation between Cars and Saia

Given the investment horizon of 90 days Cars is expected to generate 2.77 times less return on investment than Saia. But when comparing it to its historical volatility, Cars Inc is 1.27 times less risky than Saia. It trades about 0.03 of its potential returns per unit of risk. Saia Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  20,861  in Saia Inc on September 24, 2024 and sell it today you would earn a total of  25,233  from holding Saia Inc or generate 120.96% return on investment over 90 days.

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

Cars Inc  vs.  Saia Inc

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.

Saia Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Saia Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, Saia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cars and Saia

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

The idea behind Cars Inc and Saia Inc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.