Correlation Between Carsales and SNDL

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

Diversification Opportunities for Carsales and SNDL

0.32

Correlation Coefficient

Carsales  SNDL

Weak diversification

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

Pair Corralation between Carsales and SNDL

Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to generate 1.34 times more return on investment than SNDL. However, Carsales is 1.34 times more volatile than SNDL Inc. It trades about -0.04 of its potential returns per unit of risk. SNDL Inc is currently generating about -0.07 per unit of risk. If you would invest  4,619  in CarsalesCom Ltd ADR on December 20, 2024 and sell it today you would lose (519.00) from holding CarsalesCom Ltd ADR or give up 11.24% 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.  SNDL Inc

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 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.

SNDL Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Carsales and SNDL

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

The idea behind CarsalesCom Ltd ADR and SNDL Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.