Correlation Between FAIR ISAAC and Carsales

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

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

Diversification Opportunities for FAIR ISAAC and Carsales

0.88

Correlation Coefficient

FAIR ISAAC  Carsales

Very poor diversification

The 3 months correlation between FAIR and Carsales is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding FAIR ISAAC and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom and FAIR ISAAC 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 FAIR ISAAC 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 FAIR ISAAC i.e., FAIR ISAAC and Carsales go up and down completely randomly.

Pair Corralation between FAIR ISAAC and Carsales

Assuming the 90 days trading horizon FAIR ISAAC is expected to generate 1.23 times more return on investment than Carsales. However, FAIR ISAAC is 1.23 times more volatile than CarsalesCom. It trades about 0.13 of its potential returns per unit of risk. CarsalesCom is currently generating about 0.07 per unit of risk. If you would invest  63,500  in FAIR ISAAC on October 10, 2024 and sell it today you would earn a total of  124,900  from holding FAIR ISAAC or generate 196.69% return on investment over 90 days.

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

FAIR ISAAC  vs.  CarsalesCom

FAIR ISAAC

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FAIR ISAAC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, FAIR ISAAC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 FAIR ISAAC and Carsales

The main advantage of trading using opposite FAIR ISAAC and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAIR ISAAC 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 FAIR ISAAC 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.