Correlation Between CARSALES and Equitable Holdings

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

By analyzing existing cross correlation between CARSALESCOM and Equitable Holdings, you can compare the effects of market volatilities on CARSALES and Equitable Holdings 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 Equitable Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARSALES and Equitable Holdings.

Diversification Opportunities for CARSALES and Equitable Holdings

0.18

Correlation Coefficient

CARSALES  Equitable Holdings

Average diversification

The 3 months correlation between CARSALES and Equitable is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Equitable Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitable Holdings 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 Equitable Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitable Holdings has no effect on the direction of CARSALES i.e., CARSALES and Equitable Holdings go up and down completely randomly.

Pair Corralation between CARSALES and Equitable Holdings

Assuming the 90 days trading horizon CARSALES is expected to generate 3.83 times less return on investment than Equitable Holdings. In addition to that, CARSALES is 1.51 times more volatile than Equitable Holdings. It trades about 0.09 of its total potential returns per unit of risk. Equitable Holdings is currently generating about 0.53 per unit of volatility. If you would invest  4,420  in Equitable Holdings on October 22, 2024 and sell it today you would earn a total of  520.00  from holding Equitable Holdings or generate 11.76% return on investment over 90 days.

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

CARSALESCOM  vs.  Equitable Holdings

CARSALESCOM

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CARSALES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Equitable Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equitable Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Equitable Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CARSALES and Equitable Holdings

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

The idea behind CARSALESCOM and Equitable Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.