Correlation Between Cars and AETNA

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

By analyzing existing cross correlation between Cars Inc and AETNA INC 7625, you can compare the effects of market volatilities on Cars and AETNA 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 AETNA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and AETNA.

Diversification Opportunities for Cars and AETNA

-0.49

Correlation Coefficient

Cars  AETNA

Very good diversification

The 3 months correlation between Cars and AETNA is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and AETNA INC 7625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AETNA INC 7625 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 AETNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AETNA INC 7625 has no effect on the direction of Cars i.e., Cars and AETNA go up and down completely randomly.

Pair Corralation between Cars and AETNA

Given the investment horizon of 90 days Cars Inc is expected to under-perform the AETNA. In addition to that, Cars is 3.06 times more volatile than AETNA INC 7625. It trades about -0.16 of its total potential returns per unit of risk. AETNA INC 7625 is currently generating about -0.02 per unit of volatility. If you would invest  10,354  in AETNA INC 7625 on December 21, 2024 and sell it today you would lose (125.00) from holding AETNA INC 7625 or give up 1.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	55.0%
Values	Daily Returns

Cars Inc  vs.  AETNA INC 7625

Cars Inc

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

AETNA INC 7625

Risk-Adjusted Performance

Very Weak

Over the last 90 days AETNA INC 7625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AETNA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cars and AETNA

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

The idea behind Cars Inc and AETNA INC 7625 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.