Correlation Between EROAD and Autosports Group

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

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

Diversification Opportunities for EROAD and Autosports Group

-0.44

Correlation Coefficient

EROAD  Autosports Group

Very good diversification

The 3 months correlation between EROAD and Autosports is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Autosports Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autosports Group and EROAD 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 EROAD are associated (or correlated) with Autosports Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autosports Group has no effect on the direction of EROAD i.e., EROAD and Autosports Group go up and down completely randomly.

Pair Corralation between EROAD and Autosports Group

Assuming the 90 days trading horizon EROAD is expected to under-perform the Autosports Group. In addition to that, EROAD is 1.23 times more volatile than Autosports Group. It trades about -0.07 of its total potential returns per unit of risk. Autosports Group is currently generating about 0.04 per unit of volatility. If you would invest  172.00  in Autosports Group on December 30, 2024 and sell it today you would earn a total of  6.00  from holding Autosports Group or generate 3.49% return on investment over 90 days.

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

EROAD  vs.  Autosports Group

EROAD

Risk-Adjusted Performance

Very Weak

Over the last 90 days EROAD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Autosports Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Autosports Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Autosports Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with EROAD and Autosports Group

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

The idea behind EROAD and Autosports Group 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.