Correlation Between Cars and DBS GROUP

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

By analyzing existing cross correlation between Cars Inc and DBS GROUP ADR4, you can compare the effects of market volatilities on Cars and DBS GROUP 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 DBS GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and DBS GROUP.

Diversification Opportunities for Cars and DBS GROUP

0.85

Correlation Coefficient

Cars  DBS GROUP

Very poor diversification

The 3 months correlation between Cars and DBS is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and DBS GROUP ADR4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBS GROUP ADR4 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 DBS GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBS GROUP ADR4 has no effect on the direction of Cars i.e., Cars and DBS GROUP go up and down completely randomly.

Pair Corralation between Cars and DBS GROUP

Assuming the 90 days horizon Cars Inc is expected to under-perform the DBS GROUP. In addition to that, Cars is 2.26 times more volatile than DBS GROUP ADR4. It trades about -0.37 of its total potential returns per unit of risk. DBS GROUP ADR4 is currently generating about 0.18 per unit of volatility. If you would invest  12,300  in DBS GROUP ADR4 on October 12, 2024 and sell it today you would earn a total of  300.00  from holding DBS GROUP ADR4 or generate 2.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.44%
Values	Daily Returns

Cars Inc  vs.  DBS GROUP ADR4

Cars Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 8 (%) 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.

DBS GROUP ADR4

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DBS GROUP ADR4 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DBS GROUP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cars and DBS GROUP

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

The idea behind Cars Inc and DBS GROUP ADR4 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.