Correlation Between Cars and IND+COMMBK CHINA

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

By analyzing existing cross correlation between Cars Inc and INDCOMMBK CHINA ADR20, you can compare the effects of market volatilities on Cars and IND+COMMBK CHINA 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 IND+COMMBK CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and IND+COMMBK CHINA.

Diversification Opportunities for Cars and IND+COMMBK CHINA

-0.56

Correlation Coefficient

Cars  IND+COMMBK CHINA

Excellent diversification

The 3 months correlation between Cars and IND+COMMBK is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and INDCOMMBK CHINA ADR20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDCOMMBK CHINA ADR20 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 IND+COMMBK CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDCOMMBK CHINA ADR20 has no effect on the direction of Cars i.e., Cars and IND+COMMBK CHINA go up and down completely randomly.

Pair Corralation between Cars and IND+COMMBK CHINA

Assuming the 90 days horizon Cars Inc is expected to under-perform the IND+COMMBK CHINA. In addition to that, Cars is 5.12 times more volatile than INDCOMMBK CHINA ADR20. It trades about -0.34 of its total potential returns per unit of risk. INDCOMMBK CHINA ADR20 is currently generating about -0.06 per unit of volatility. If you would invest  1,320  in INDCOMMBK CHINA ADR20 on December 11, 2024 and sell it today you would lose (20.00) from holding INDCOMMBK CHINA ADR20 or give up 1.52% of portfolio value over 90 days.

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

Cars Inc  vs.  INDCOMMBK CHINA ADR20

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.

INDCOMMBK CHINA ADR20

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INDCOMMBK CHINA ADR20 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, IND+COMMBK CHINA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cars and IND+COMMBK CHINA

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

The idea behind Cars Inc and INDCOMMBK CHINA ADR20 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.