Correlation Between Gateway Real and CARSALESCOM

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

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

Diversification Opportunities for Gateway Real and CARSALESCOM

-0.17

Correlation Coefficient

Gateway Real  CARSALESCOM

Good diversification

The 3 months correlation between Gateway and CARSALESCOM is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Gateway Real Estate and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM and Gateway Real 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 Gateway Real Estate are associated (or correlated) with CARSALESCOM. 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 Gateway Real i.e., Gateway Real and CARSALESCOM go up and down completely randomly.

Pair Corralation between Gateway Real and CARSALESCOM

Assuming the 90 days horizon Gateway Real Estate is expected to under-perform the CARSALESCOM. In addition to that, Gateway Real is 7.54 times more volatile than CARSALESCOM. It trades about -0.27 of its total potential returns per unit of risk. CARSALESCOM is currently generating about -0.55 per unit of volatility. If you would invest  2,460  in CARSALESCOM on October 8, 2024 and sell it today you would lose (260.00) from holding CARSALESCOM or give up 10.57% of portfolio value over 90 days.

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

Gateway Real Estate  vs.  CARSALESCOM

Gateway Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gateway Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company 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. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gateway Real and CARSALESCOM

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

The idea behind Gateway Real Estate 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.