Correlation Between CARSALES and Canon Marketing

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

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

Diversification Opportunities for CARSALES and Canon Marketing

0.31

Correlation Coefficient

CARSALES  Canon Marketing

Weak diversification

The 3 months correlation between CARSALES and Canon is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Canon Marketing Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canon Marketing Japan 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 Canon Marketing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canon Marketing Japan has no effect on the direction of CARSALES i.e., CARSALES and Canon Marketing go up and down completely randomly.

Pair Corralation between CARSALES and Canon Marketing

Assuming the 90 days trading horizon CARSALESCOM is expected to generate 0.82 times more return on investment than Canon Marketing. However, CARSALESCOM is 1.22 times less risky than Canon Marketing. It trades about 0.19 of its potential returns per unit of risk. Canon Marketing Japan is currently generating about 0.07 per unit of risk. If you would invest  2,182  in CARSALESCOM on September 5, 2024 and sell it today you would earn a total of  378.00  from holding CARSALESCOM or generate 17.32% return on investment over 90 days.

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

CARSALESCOM  vs.  Canon Marketing Japan

CARSALESCOM

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CARSALES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Canon Marketing Japan

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canon Marketing Japan are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Canon Marketing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CARSALES and Canon Marketing

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

The idea behind CARSALESCOM and Canon Marketing Japan 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.