Correlation Between Marine Products and Carsales

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

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

Diversification Opportunities for Marine Products and Carsales

0.33

Correlation Coefficient

Marine Products  Carsales

Weak diversification

The 3 months correlation between Marine and Carsales is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Marine Products and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR and Marine Products 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 Marine Products 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 ADR has no effect on the direction of Marine Products i.e., Marine Products and Carsales go up and down completely randomly.

Pair Corralation between Marine Products and Carsales

Considering the 90-day investment horizon Marine Products is expected to under-perform the Carsales. In addition to that, Marine Products is 1.06 times more volatile than CarsalesCom Ltd ADR. It trades about -0.01 of its total potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.05 per unit of volatility. If you would invest  2,945  in CarsalesCom Ltd ADR on October 4, 2024 and sell it today you would earn a total of  1,605  from holding CarsalesCom Ltd ADR or generate 54.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.71%
Values	Daily Returns

Marine Products  vs.  CarsalesCom Ltd ADR

Marine Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marine Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

CarsalesCom ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Marine Products and Carsales

The main advantage of trading using opposite Marine Products and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marine Products 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 Marine Products and CarsalesCom Ltd ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.