Correlation Between Carsales and Radcom

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

Diversification Opportunities for Carsales and Radcom

0.32

Correlation Coefficient

Carsales  Radcom

Weak diversification

The 3 months correlation between Carsales and Radcom is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of Carsales i.e., Carsales and Radcom go up and down completely randomly.

Pair Corralation between Carsales and Radcom

Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to under-perform the Radcom. But the pink sheet apears to be less risky and, when comparing its historical volatility, CarsalesCom Ltd ADR is 1.11 times less risky than Radcom. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Radcom is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,188  in Radcom on December 30, 2024 and sell it today you would lose (8.00) from holding Radcom or give up 0.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  Radcom

CarsalesCom ADR

Risk-Adjusted Performance

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, Carsales is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Radcom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Radcom is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Carsales and Radcom

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

The idea behind CarsalesCom Ltd ADR and Radcom 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.