Correlation Between Cars and EMPLOYERS HLDGS

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

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

Diversification Opportunities for Cars and EMPLOYERS HLDGS

0.82

Correlation Coefficient

Cars  EMPLOYERS HLDGS

Very poor diversification

The 3 months correlation between Cars and EMPLOYERS is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and EMPLOYERS HLDGS DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMPLOYERS HLDGS DL 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 EMPLOYERS HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMPLOYERS HLDGS DL has no effect on the direction of Cars i.e., Cars and EMPLOYERS HLDGS go up and down completely randomly.

Pair Corralation between Cars and EMPLOYERS HLDGS

Assuming the 90 days horizon Cars Inc is expected to under-perform the EMPLOYERS HLDGS. In addition to that, Cars is 1.43 times more volatile than EMPLOYERS HLDGS DL. It trades about -0.27 of its total potential returns per unit of risk. EMPLOYERS HLDGS DL is currently generating about -0.26 per unit of volatility. If you would invest  4,940  in EMPLOYERS HLDGS DL on October 11, 2024 and sell it today you would lose (260.00) from holding EMPLOYERS HLDGS DL or give up 5.26% of portfolio value over 90 days.

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

Cars Inc  vs.  EMPLOYERS HLDGS DL

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 weak basic indicators, Cars reported solid returns over the last few months and may actually be approaching a breakup point.

EMPLOYERS HLDGS DL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EMPLOYERS HLDGS DL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EMPLOYERS HLDGS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cars and EMPLOYERS HLDGS

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

The idea behind Cars Inc and EMPLOYERS HLDGS DL 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.