Correlation Between CarsalesCom and CVR Partners

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

Diversification Opportunities for CarsalesCom and CVR Partners

0.0

Correlation Coefficient

CarsalesCom  CVR Partners

Pay attention - limited upside

The 3 months correlation between CarsalesCom and CVR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and CVR Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Partners LP 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 CVR Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Partners LP has no effect on the direction of CarsalesCom i.e., CarsalesCom and CVR Partners go up and down completely randomly.

Pair Corralation between CarsalesCom and CVR Partners

Assuming the 90 days horizon CarsalesCom is expected to generate 2.06 times less return on investment than CVR Partners. In addition to that, CarsalesCom is 1.19 times more volatile than CVR Partners LP. It trades about 0.02 of its total potential returns per unit of risk. CVR Partners LP is currently generating about 0.06 per unit of volatility. If you would invest  6,428  in CVR Partners LP on October 24, 2024 and sell it today you would earn a total of  1,728  from holding CVR Partners LP or generate 26.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	93.52%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  CVR Partners LP

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 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.

CVR Partners LP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Partners LP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, CVR Partners displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CarsalesCom and CVR Partners

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

The idea behind CarsalesCom Ltd ADR and CVR Partners LP 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.