Correlation Between TEGNA and Carsales

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

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

Diversification Opportunities for TEGNA and Carsales

0.41

Correlation Coefficient

TEGNA  Carsales

Very weak diversification

The 3 months correlation between TEGNA and Carsales is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding TEGNA Inc and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom and TEGNA 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 TEGNA Inc 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 TEGNA i.e., TEGNA and Carsales go up and down completely randomly.

Pair Corralation between TEGNA and Carsales

Assuming the 90 days horizon TEGNA Inc is expected to under-perform the Carsales. But the stock apears to be less risky and, when comparing its historical volatility, TEGNA Inc is 1.5 times less risky than Carsales. The stock trades about -0.08 of its potential returns per unit of risk. The CarsalesCom is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,220  in CarsalesCom on October 23, 2024 and sell it today you would earn a total of  60.00  from holding CarsalesCom or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.12%
Values	Daily Returns

TEGNA Inc  vs.  CarsalesCom

TEGNA Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TEGNA Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TEGNA reported solid returns over the last few months and may actually be approaching a breakup point.

CarsalesCom

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Carsales is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TEGNA and Carsales

The main advantage of trading using opposite TEGNA and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TEGNA 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 TEGNA Inc 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.