Correlation Between Cabo Drilling and Cars

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

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

Diversification Opportunities for Cabo Drilling and Cars

0.0

Correlation Coefficient

Cabo Drilling  Cars

Pay attention - limited upside

The 3 months correlation between Cabo and Cars is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cabo Drilling Corp and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and Cabo Drilling 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 Cabo Drilling Corp are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Cabo Drilling i.e., Cabo Drilling and Cars go up and down completely randomly.

Pair Corralation between Cabo Drilling and Cars

If you would invest  1,575  in Cars Inc on October 25, 2024 and sell it today you would earn a total of  191.00  from holding Cars Inc or generate 12.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Cabo Drilling Corp  vs.  Cars Inc

Cabo Drilling Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabo Drilling Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Cabo Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Cars Inc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Cars unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cabo Drilling and Cars

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

The idea behind Cabo Drilling Corp and Cars 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.