Correlation Between Cars and Elis SA

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

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

Diversification Opportunities for Cars and Elis SA

-0.36

Correlation Coefficient

Cars  Elis SA

Very good diversification

The 3 months correlation between Cars and Elis is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Elis SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elis SA 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 Elis SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elis SA has no effect on the direction of Cars i.e., Cars and Elis SA go up and down completely randomly.

Pair Corralation between Cars and Elis SA

Assuming the 90 days horizon Cars Inc is expected to under-perform the Elis SA. In addition to that, Cars is 1.04 times more volatile than Elis SA. It trades about -0.24 of its total potential returns per unit of risk. Elis SA is currently generating about -0.12 per unit of volatility. If you would invest  1,925  in Elis SA on October 10, 2024 and sell it today you would lose (64.00) from holding Elis SA or give up 3.32% of portfolio value over 90 days.

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

Cars Inc  vs.  Elis SA

Cars Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cars reported solid returns over the last few months and may actually be approaching a breakup point.

Elis SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elis SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Cars and Elis SA

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

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