Correlation Between CarsalesCom and Where Food

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

Diversification Opportunities for CarsalesCom and Where Food

0.63

Correlation Coefficient

CarsalesCom  Where Food

Poor diversification

The 3 months correlation between CarsalesCom and Where is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and Where Food Comes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Where Food Comes 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 Where Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Where Food Comes has no effect on the direction of CarsalesCom i.e., CarsalesCom and Where Food go up and down completely randomly.

Pair Corralation between CarsalesCom and Where Food

Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to generate 1.09 times more return on investment than Where Food. However, CarsalesCom is 1.09 times more volatile than Where Food Comes. It trades about 0.05 of its potential returns per unit of risk. Where Food Comes is currently generating about 0.0 per unit of risk. If you would invest  3,004  in CarsalesCom Ltd ADR on September 27, 2024 and sell it today you would earn a total of  1,546  from holding CarsalesCom Ltd ADR or generate 51.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.26%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  Where Food Comes

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 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.

Where Food Comes

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Where Food Comes are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Where Food reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CarsalesCom and Where Food

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

The idea behind CarsalesCom Ltd ADR and Where Food Comes 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.