Correlation Between CVR Energy and Subaru Corp

Can any of the company-specific risk be diversified away by investing in both CVR Energy and Subaru Corp 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 CVR Energy and Subaru Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVR Energy and Subaru Corp ADR, you can compare the effects of market volatilities on CVR Energy and Subaru Corp 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 CVR Energy with a short position of Subaru Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVR Energy and Subaru Corp.

Diversification Opportunities for CVR Energy and Subaru Corp

0.63

Correlation Coefficient

CVR Energy  Subaru Corp

Poor diversification

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

Pair Corralation between CVR Energy and Subaru Corp

Considering the 90-day investment horizon CVR Energy is expected to generate 1.73 times more return on investment than Subaru Corp. However, CVR Energy is 1.73 times more volatile than Subaru Corp ADR. It trades about 0.3 of its potential returns per unit of risk. Subaru Corp ADR is currently generating about -0.05 per unit of risk. If you would invest  1,597  in CVR Energy on September 2, 2024 and sell it today you would earn a total of  338.00  from holding CVR Energy or generate 21.16% return on investment over 90 days.

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

CVR Energy  vs.  Subaru Corp ADR

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Subaru Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Subaru Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CVR Energy and Subaru Corp

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

The idea behind CVR Energy and Subaru Corp ADR 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.