Correlation Between CarsalesCom and OZ Minerals

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

Diversification Opportunities for CarsalesCom and OZ Minerals

0.23

Correlation Coefficient

CarsalesCom  OZ Minerals

Modest diversification

The 3 months correlation between CarsalesCom and OZMLF is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and OZ Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OZ Minerals Limited 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 OZ Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OZ Minerals Limited has no effect on the direction of CarsalesCom i.e., CarsalesCom and OZ Minerals go up and down completely randomly.

Pair Corralation between CarsalesCom and OZ Minerals

Assuming the 90 days horizon CarsalesCom is expected to generate 1.07 times less return on investment than OZ Minerals. But when comparing it to its historical volatility, CarsalesCom Ltd ADR is 1.83 times less risky than OZ Minerals. It trades about 0.08 of its potential returns per unit of risk. OZ Minerals Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,709  in OZ Minerals Limited on September 20, 2024 and sell it today you would earn a total of  191.00  from holding OZ Minerals Limited or generate 11.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	21.59%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  OZ Minerals Limited

CarsalesCom ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

OZ Minerals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CarsalesCom and OZ Minerals

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

The idea behind CarsalesCom Ltd ADR and OZ Minerals Limited 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.