Correlation Between Leslies and CarPartsCom

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

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

Diversification Opportunities for Leslies and CarPartsCom

-0.41

Correlation Coefficient

Leslies  CarPartsCom

Very good diversification

The 3 months correlation between Leslies and CarPartsCom is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Leslies and CarPartsCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarPartsCom and Leslies 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 Leslies are associated (or correlated) with CarPartsCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarPartsCom has no effect on the direction of Leslies i.e., Leslies and CarPartsCom go up and down completely randomly.

Pair Corralation between Leslies and CarPartsCom

Given the investment horizon of 90 days Leslies is expected to under-perform the CarPartsCom. But the stock apears to be less risky and, when comparing its historical volatility, Leslies is 1.84 times less risky than CarPartsCom. The stock trades about -0.03 of its potential returns per unit of risk. The CarPartsCom is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  92.00  in CarPartsCom on October 25, 2024 and sell it today you would earn a total of  30.00  from holding CarPartsCom or generate 32.61% return on investment over 90 days.

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

Leslies  vs.  CarPartsCom

Leslies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leslies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

CarPartsCom

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CarPartsCom are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CarPartsCom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leslies and CarPartsCom

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

The idea behind Leslies and CarPartsCom 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.