Correlation Between CarsalesCom and Blue Capital

Can any of the company-specific risk be diversified away by investing in both CarsalesCom and Blue Capital 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 Blue Capital 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 Blue Capital Reinsurance, you can compare the effects of market volatilities on CarsalesCom and Blue Capital 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 Blue Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarsalesCom and Blue Capital.

Diversification Opportunities for CarsalesCom and Blue Capital

-0.14

Correlation Coefficient

CarsalesCom  Blue Capital

Good diversification

The 3 months correlation between CarsalesCom and Blue is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and Blue Capital Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Capital Reinsurance 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 Blue Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Capital Reinsurance has no effect on the direction of CarsalesCom i.e., CarsalesCom and Blue Capital go up and down completely randomly.

Pair Corralation between CarsalesCom and Blue Capital

Assuming the 90 days horizon CarsalesCom is expected to generate 3.37 times less return on investment than Blue Capital. But when comparing it to its historical volatility, CarsalesCom Ltd ADR is 5.26 times less risky than Blue Capital. It trades about 0.08 of its potential returns per unit of risk. Blue Capital Reinsurance is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Blue Capital Reinsurance on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Blue Capital Reinsurance or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.88%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  Blue Capital Reinsurance

CarsalesCom ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, CarsalesCom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Blue Capital Reinsurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Capital Reinsurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Blue Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CarsalesCom and Blue Capital

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

The idea behind CarsalesCom Ltd ADR and Blue Capital Reinsurance 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.