Correlation Between Carsales and Tigo Energy

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

Diversification Opportunities for Carsales and Tigo Energy

0.01

Correlation Coefficient

Carsales  Tigo Energy

Significant diversification

The 3 months correlation between Carsales and Tigo is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and Tigo Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigo Energy 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 Tigo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigo Energy has no effect on the direction of Carsales i.e., Carsales and Tigo Energy go up and down completely randomly.

Pair Corralation between Carsales and Tigo Energy

Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to under-perform the Tigo Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, CarsalesCom Ltd ADR is 1.37 times less risky than Tigo Energy. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Tigo Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  91.00  in Tigo Energy on December 22, 2024 and sell it today you would earn a total of  12.00  from holding Tigo Energy or generate 13.19% return on investment over 90 days.

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

CarsalesCom Ltd ADR  vs.  Tigo Energy

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.

Tigo Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tigo Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Tigo Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carsales and Tigo Energy

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

The idea behind CarsalesCom Ltd ADR and Tigo Energy 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..