Correlation Between Liaoning Port and Carsales

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

By analyzing existing cross correlation between Liaoning Port CoLtd and CarsalesCom, you can compare the effects of market volatilities on Liaoning Port and Carsales 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 Liaoning Port with a short position of Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liaoning Port and Carsales.

Diversification Opportunities for Liaoning Port and Carsales

0.35

Correlation Coefficient

Liaoning Port  Carsales

Weak diversification

The 3 months correlation between Liaoning and Carsales is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Liaoning Port CoLtd and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom and Liaoning Port 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 Liaoning Port CoLtd are associated (or correlated) with Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Liaoning Port i.e., Liaoning Port and Carsales go up and down completely randomly.

Pair Corralation between Liaoning Port and Carsales

Assuming the 90 days horizon Liaoning Port CoLtd is expected to generate 1.48 times more return on investment than Carsales. However, Liaoning Port is 1.48 times more volatile than CarsalesCom. It trades about -0.25 of its potential returns per unit of risk. CarsalesCom is currently generating about -0.49 per unit of risk. If you would invest  8.45  in Liaoning Port CoLtd on October 10, 2024 and sell it today you would lose (0.65) from holding Liaoning Port CoLtd or give up 7.69% of portfolio value over 90 days.

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

Liaoning Port CoLtd  vs.  CarsalesCom

Liaoning Port CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liaoning Port CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Liaoning Port is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CarsalesCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Carsales is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Liaoning Port and Carsales

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

The idea behind Liaoning Port CoLtd and CarsalesCom 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.