Correlation Between CarsalesCom and NHPBP

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

Diversification Opportunities for CarsalesCom and NHPBP

-0.19

Correlation Coefficient

CarsalesCom  NHPBP

Good diversification

The 3 months correlation between CarsalesCom and NHPBP is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and NHPBP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NHPBP 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 NHPBP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NHPBP has no effect on the direction of CarsalesCom i.e., CarsalesCom and NHPBP go up and down completely randomly.

Pair Corralation between CarsalesCom and NHPBP

Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to under-perform the NHPBP. In addition to that, CarsalesCom is 1.61 times more volatile than NHPBP. It trades about -0.22 of its total potential returns per unit of risk. NHPBP is currently generating about -0.07 per unit of volatility. If you would invest  1,479  in NHPBP on October 12, 2024 and sell it today you would lose (53.00) from holding NHPBP or give up 3.58% of portfolio value over 90 days.

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

CarsalesCom Ltd ADR  vs.  NHPBP

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.

NHPBP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NHPBP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with CarsalesCom and NHPBP

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

The idea behind CarsalesCom Ltd ADR and NHPBP 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.