Correlation Between Partners Value and Automotive Finco

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

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

Diversification Opportunities for Partners Value and Automotive Finco

0.56

Correlation Coefficient

Partners Value  Automotive Finco

Very weak diversification

The 3 months correlation between Partners and Automotive is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Partners Value Investments and Automotive Finco Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automotive Finco Corp and Partners Value 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 Partners Value Investments are associated (or correlated) with Automotive Finco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automotive Finco Corp has no effect on the direction of Partners Value i.e., Partners Value and Automotive Finco go up and down completely randomly.

Pair Corralation between Partners Value and Automotive Finco

Assuming the 90 days trading horizon Partners Value Investments is expected to generate 0.73 times more return on investment than Automotive Finco. However, Partners Value Investments is 1.37 times less risky than Automotive Finco. It trades about 0.22 of its potential returns per unit of risk. Automotive Finco Corp is currently generating about 0.07 per unit of risk. If you would invest  11,400  in Partners Value Investments on October 10, 2024 and sell it today you would earn a total of  3,750  from holding Partners Value Investments or generate 32.89% return on investment over 90 days.

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

Partners Value Investments  vs.  Automotive Finco Corp

Partners Value Inves

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Partners Value Investments are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Partners Value sustained solid returns over the last few months and may actually be approaching a breakup point.

Automotive Finco Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Automotive Finco Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Automotive Finco sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Partners Value and Automotive Finco

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

The idea behind Partners Value Investments and Automotive Finco Corp 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.