Correlation Between CARSALES and MOVIE GAMES

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

By analyzing existing cross correlation between CARSALESCOM and MOVIE GAMES SA, you can compare the effects of market volatilities on CARSALES and MOVIE GAMES 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 CARSALES with a short position of MOVIE GAMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARSALES and MOVIE GAMES.

Diversification Opportunities for CARSALES and MOVIE GAMES

0.03

Correlation Coefficient

CARSALES  MOVIE GAMES

Significant diversification

The 3 months correlation between CARSALES and MOVIE is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and MOVIE GAMES SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOVIE GAMES SA and CARSALES 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 CARSALESCOM are associated (or correlated) with MOVIE GAMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOVIE GAMES SA has no effect on the direction of CARSALES i.e., CARSALES and MOVIE GAMES go up and down completely randomly.

Pair Corralation between CARSALES and MOVIE GAMES

Assuming the 90 days trading horizon CARSALESCOM is expected to under-perform the MOVIE GAMES. But the stock apears to be less risky and, when comparing its historical volatility, CARSALESCOM is 1.78 times less risky than MOVIE GAMES. The stock trades about -0.1 of its potential returns per unit of risk. The MOVIE GAMES SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  356.00  in MOVIE GAMES SA on December 24, 2024 and sell it today you would earn a total of  43.00  from holding MOVIE GAMES SA or generate 12.08% return on investment over 90 days.

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

CARSALESCOM  vs.  MOVIE GAMES SA

CARSALESCOM

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

MOVIE GAMES SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MOVIE GAMES SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MOVIE GAMES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CARSALES and MOVIE GAMES

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

The idea behind CARSALESCOM and MOVIE GAMES SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.