Correlation Between CANON MARKETING and AUTO TRADER

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

By analyzing existing cross correlation between CANON MARKETING JP and AUTO TRADER ADR, you can compare the effects of market volatilities on CANON MARKETING and AUTO TRADER 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 CANON MARKETING with a short position of AUTO TRADER. Check out your portfolio center. Please also check ongoing floating volatility patterns of CANON MARKETING and AUTO TRADER.

Diversification Opportunities for CANON MARKETING and AUTO TRADER

-0.5

Correlation Coefficient

CANON MARKETING  AUTO TRADER

Very good diversification

The 3 months correlation between CANON and AUTO is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding CANON MARKETING JP and AUTO TRADER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTO TRADER ADR and CANON MARKETING 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 CANON MARKETING JP are associated (or correlated) with AUTO TRADER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTO TRADER ADR has no effect on the direction of CANON MARKETING i.e., CANON MARKETING and AUTO TRADER go up and down completely randomly.

Pair Corralation between CANON MARKETING and AUTO TRADER

Assuming the 90 days trading horizon CANON MARKETING JP is expected to generate 0.76 times more return on investment than AUTO TRADER. However, CANON MARKETING JP is 1.32 times less risky than AUTO TRADER. It trades about 0.19 of its potential returns per unit of risk. AUTO TRADER ADR is currently generating about -0.11 per unit of risk. If you would invest  2,620  in CANON MARKETING JP on October 24, 2024 and sell it today you would earn a total of  360.00  from holding CANON MARKETING JP or generate 13.74% return on investment over 90 days.

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

CANON MARKETING JP  vs.  AUTO TRADER ADR

CANON MARKETING JP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CANON MARKETING JP are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking indicators, CANON MARKETING unveiled solid returns over the last few months and may actually be approaching a breakup point.

AUTO TRADER ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTO TRADER ADR 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 CANON MARKETING and AUTO TRADER

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

The idea behind CANON MARKETING JP and AUTO TRADER ADR 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.