Correlation Between CarsalesCom and AIB Acquisition

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

By analyzing existing cross correlation between CarsalesCom Ltd ADR and AIB Acquisition Corp, you can compare the effects of market volatilities on CarsalesCom and AIB Acquisition 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 CarsalesCom with a short position of AIB Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarsalesCom and AIB Acquisition.

Diversification Opportunities for CarsalesCom and AIB Acquisition

0.26

Correlation Coefficient

CarsalesCom  AIB Acquisition

Modest diversification

The 3 months correlation between CarsalesCom and AIB is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and AIB Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIB Acquisition Corp and CarsalesCom 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 CarsalesCom Ltd ADR are associated (or correlated) with AIB Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIB Acquisition Corp has no effect on the direction of CarsalesCom i.e., CarsalesCom and AIB Acquisition go up and down completely randomly.

Pair Corralation between CarsalesCom and AIB Acquisition

If you would invest  1,091  in AIB Acquisition Corp on October 9, 2024 and sell it today you would earn a total of  0.00  from holding AIB Acquisition Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	5.26%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  AIB Acquisition Corp

CarsalesCom ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, CarsalesCom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AIB Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIB Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, AIB Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CarsalesCom and AIB Acquisition

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

The idea behind CarsalesCom Ltd ADR and AIB Acquisition Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.