Correlation Between Carsales and HNI Corp

Can any of the company-specific risk be diversified away by investing in both Carsales and HNI Corp 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 Carsales and HNI Corp 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 HNI Corp, you can compare the effects of market volatilities on Carsales and HNI Corp 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 Carsales with a short position of HNI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and HNI Corp.

Diversification Opportunities for Carsales and HNI Corp

0.36

Correlation Coefficient

Carsales  HNI Corp

Weak diversification

The 3 months correlation between Carsales and HNI is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and HNI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNI Corp and Carsales 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 HNI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNI Corp has no effect on the direction of Carsales i.e., Carsales and HNI Corp go up and down completely randomly.

Pair Corralation between Carsales and HNI Corp

Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to generate 1.29 times more return on investment than HNI Corp. However, Carsales is 1.29 times more volatile than HNI Corp. It trades about 0.06 of its potential returns per unit of risk. HNI Corp is currently generating about 0.07 per unit of risk. If you would invest  2,884  in CarsalesCom Ltd ADR on October 3, 2024 and sell it today you would earn a total of  1,666  from holding CarsalesCom Ltd ADR or generate 57.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.89%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  HNI 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 latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

HNI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, HNI Corp is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Carsales and HNI Corp

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

The idea behind CarsalesCom Ltd ADR and HNI 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.