Correlation Between CARSALESCOM and KURITA WTR

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

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

Diversification Opportunities for CARSALESCOM and KURITA WTR

0.62

Correlation Coefficient

CARSALESCOM  KURITA WTR

Poor diversification

The 3 months correlation between CARSALESCOM and KURITA is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and KURITA WTR INDUNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KURITA WTR INDUNSPADR 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 KURITA WTR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KURITA WTR INDUNSPADR has no effect on the direction of CARSALESCOM i.e., CARSALESCOM and KURITA WTR go up and down completely randomly.

Pair Corralation between CARSALESCOM and KURITA WTR

Assuming the 90 days trading horizon CARSALESCOM is expected to generate 0.91 times more return on investment than KURITA WTR. However, CARSALESCOM is 1.09 times less risky than KURITA WTR. It trades about 0.0 of its potential returns per unit of risk. KURITA WTR INDUNSPADR is currently generating about -0.06 per unit of risk. If you would invest  2,320  in CARSALESCOM on October 21, 2024 and sell it today you would lose (20.00) from holding CARSALESCOM or give up 0.86% of portfolio value over 90 days.

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

CARSALESCOM  vs.  KURITA WTR INDUNSPADR

CARSALESCOM

Risk-Adjusted Performance

0 of 100

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 rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

KURITA WTR INDUNSPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KURITA WTR INDUNSPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CARSALESCOM and KURITA WTR

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

The idea behind CARSALESCOM and KURITA WTR INDUNSPADR 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 Transaction History module to view history of all your transactions and understand their impact on performance.