Correlation Between RTW Venture and Cars

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

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

Diversification Opportunities for RTW Venture and Cars

0.78

Correlation Coefficient

RTW Venture  Cars

Poor diversification

The 3 months correlation between RTW and Cars is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding RTW Venture Fund and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and RTW Venture 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 RTW Venture Fund are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of RTW Venture i.e., RTW Venture and Cars go up and down completely randomly.

Pair Corralation between RTW Venture and Cars

Assuming the 90 days trading horizon RTW Venture Fund is expected to generate 0.29 times more return on investment than Cars. However, RTW Venture Fund is 3.46 times less risky than Cars. It trades about -0.15 of its potential returns per unit of risk. Cars Inc is currently generating about -0.19 per unit of risk. If you would invest  140.00  in RTW Venture Fund on December 29, 2024 and sell it today you would lose (18.00) from holding RTW Venture Fund or give up 12.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	57.81%
Values	Daily Returns

RTW Venture Fund  vs.  Cars Inc

RTW Venture Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days RTW Venture Fund has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cars Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with RTW Venture and Cars

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

The idea behind RTW Venture Fund and Cars Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.