Correlation Between CARSALESCOM and Traton SE

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

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

Diversification Opportunities for CARSALESCOM and Traton SE

0.11

Correlation Coefficient

CARSALESCOM  Traton SE

Average diversification

The 3 months correlation between CARSALESCOM and Traton is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Traton SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traton SE and CARSALESCOM 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 Traton SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traton SE has no effect on the direction of CARSALESCOM i.e., CARSALESCOM and Traton SE go up and down completely randomly.

Pair Corralation between CARSALESCOM and Traton SE

Assuming the 90 days trading horizon CARSALESCOM is expected to generate 1.23 times less return on investment than Traton SE. But when comparing it to its historical volatility, CARSALESCOM is 1.23 times less risky than Traton SE. It trades about 0.08 of its potential returns per unit of risk. Traton SE is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,476  in Traton SE on October 11, 2024 and sell it today you would earn a total of  1,434  from holding Traton SE or generate 97.15% return on investment over 90 days.

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

CARSALESCOM  vs.  Traton SE

CARSALESCOM

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Traton SE

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Traton SE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Traton SE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CARSALESCOM and Traton SE

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

The idea behind CARSALESCOM and Traton SE 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.