Correlation Between Where Food and CarsalesCom

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Can any of the company-specific risk be diversified away by investing in both Where Food and CarsalesCom 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 Where Food and CarsalesCom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Where Food Comes and CarsalesCom Ltd ADR, you can compare the effects of market volatilities on Where Food and CarsalesCom 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 Where Food with a short position of CarsalesCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Where Food and CarsalesCom.

Diversification Opportunities for Where Food and CarsalesCom

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Where and CarsalesCom is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Where Food Comes and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR and Where Food 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 Where Food Comes are associated (or correlated) with CarsalesCom. 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 Where Food i.e., Where Food and CarsalesCom go up and down completely randomly.

Pair Corralation between Where Food and CarsalesCom

Given the investment horizon of 90 days Where Food is expected to generate 182.71 times less return on investment than CarsalesCom. But when comparing it to its historical volatility, Where Food Comes is 1.09 times less risky than CarsalesCom. It trades about 0.0 of its potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,004  in CarsalesCom Ltd ADR on September 27, 2024 and sell it today you would earn a total of  1,546  from holding CarsalesCom Ltd ADR or generate 51.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy88.26%
ValuesDaily Returns

Where Food Comes  vs.  CarsalesCom Ltd ADR

 Performance 
       Timeline  
Where Food Comes 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Where Food Comes are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Where Food reported solid returns over the last few months and may actually be approaching a breakup point.
CarsalesCom ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 fairly strong basic indicators, CarsalesCom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Where Food and CarsalesCom Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Where Food and CarsalesCom

The main advantage of trading using opposite Where Food and CarsalesCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Where Food position performs unexpectedly, CarsalesCom 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 CarsalesCom will offset losses from the drop in CarsalesCom's long position.
The idea behind Where Food Comes 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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