Correlation Between Mister Car and Smart Share

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

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

Diversification Opportunities for Mister Car and Smart Share

-0.07

Correlation Coefficient

Mister Car  Smart Share

Good diversification

The 3 months correlation between Mister and Smart is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Mister Car Wash, and Smart Share Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Share Global and Mister Car 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 Mister Car Wash, are associated (or correlated) with Smart Share. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Share Global has no effect on the direction of Mister Car i.e., Mister Car and Smart Share go up and down completely randomly.

Pair Corralation between Mister Car and Smart Share

Considering the 90-day investment horizon Mister Car is expected to generate 17.14 times less return on investment than Smart Share. But when comparing it to its historical volatility, Mister Car Wash, is 1.72 times less risky than Smart Share. It trades about 0.0 of its potential returns per unit of risk. Smart Share Global is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  122.00  in Smart Share Global on November 20, 2024 and sell it today you would lose (7.00) from holding Smart Share Global or give up 5.74% of portfolio value over 90 days.

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

Mister Car Wash,  vs.  Smart Share Global

Mister Car Wash,

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mister Car Wash, are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Mister Car is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Smart Share Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Smart Share displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mister Car and Smart Share

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

The idea behind Mister Car Wash, and Smart Share Global 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.