Correlation Between Smart Share and Mister Car

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

By analyzing existing cross correlation between Smart Share Global and Mister Car Wash,, you can compare the effects of market volatilities on Smart Share and Mister Car 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 Smart Share with a short position of Mister Car. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart Share and Mister Car.

Diversification Opportunities for Smart Share and Mister Car

0.05

Correlation Coefficient

Smart Share  Mister Car

Significant diversification

The 3 months correlation between Smart and Mister is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global and Mister Car Wash, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mister Car Wash, and Smart Share 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 Smart Share Global are associated (or correlated) with Mister Car. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mister Car Wash, has no effect on the direction of Smart Share i.e., Smart Share and Mister Car go up and down completely randomly.

Pair Corralation between Smart Share and Mister Car

Allowing for the 90-day total investment horizon Smart Share Global is expected to generate 2.94 times more return on investment than Mister Car. However, Smart Share is 2.94 times more volatile than Mister Car Wash,. It trades about 0.16 of its potential returns per unit of risk. Mister Car Wash, is currently generating about -0.06 per unit of risk. If you would invest  73.00  in Smart Share Global on November 28, 2024 and sell it today you would earn a total of  40.00  from holding Smart Share Global or generate 54.79% return on investment over 90 days.

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

Smart Share Global  vs.  Mister Car Wash,

Smart Share Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Smart Share displayed solid returns over the last few months and may actually be approaching a breakup point.

Mister Car Wash,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mister Car Wash, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Smart Share and Mister Car

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

The idea behind Smart Share Global and Mister Car Wash, 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.