Correlation Between Cars and GVS SPA

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

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

Diversification Opportunities for Cars and GVS SPA

0.01

Correlation Coefficient

Cars  GVS SPA

Significant diversification

The 3 months correlation between Cars and GVS is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and GVS SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GVS SPA 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 GVS SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GVS SPA has no effect on the direction of Cars i.e., Cars and GVS SPA go up and down completely randomly.

Pair Corralation between Cars and GVS SPA

Assuming the 90 days horizon Cars Inc is expected to under-perform the GVS SPA. In addition to that, Cars is 2.08 times more volatile than GVS SPA. It trades about -0.14 of its total potential returns per unit of risk. GVS SPA is currently generating about 0.06 per unit of volatility. If you would invest  474.00  in GVS SPA on December 26, 2024 and sell it today you would earn a total of  32.00  from holding GVS SPA or generate 6.75% return on investment over 90 days.

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

Cars Inc  vs.  GVS SPA

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

GVS SPA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GVS SPA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GVS SPA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cars and GVS SPA

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

The idea behind Cars Inc and GVS SPA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.