Correlation Between TFI International and Carsales

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

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

Diversification Opportunities for TFI International and Carsales

0.52

Correlation Coefficient

TFI International  Carsales

Very weak diversification

The 3 months correlation between TFI and Carsales is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR and TFI International 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 TFI International 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 TFI International i.e., TFI International and Carsales go up and down completely randomly.

Pair Corralation between TFI International and Carsales

Given the investment horizon of 90 days TFI International is expected to generate 0.66 times more return on investment than Carsales. However, TFI International is 1.53 times less risky than Carsales. It trades about 0.0 of its potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about -0.03 per unit of risk. If you would invest  13,279  in TFI International on October 5, 2024 and sell it today you would lose (104.00) from holding TFI International or give up 0.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

TFI International  vs.  CarsalesCom Ltd ADR

TFI International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TFI International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 TFI International and Carsales

The main advantage of trading using opposite TFI International and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFI International 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 TFI International 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 Valuation module to check real value of public entities based on technical and fundamental data.