Correlation Between CARSALES and FLOW TRADERS

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

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

Diversification Opportunities for CARSALES and FLOW TRADERS

0.11

Correlation Coefficient

CARSALES  FLOW TRADERS

Average diversification

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

Pair Corralation between CARSALES and FLOW TRADERS

Assuming the 90 days trading horizon CARSALESCOM is expected to generate 0.81 times more return on investment than FLOW TRADERS. However, CARSALESCOM is 1.24 times less risky than FLOW TRADERS. It trades about 0.07 of its potential returns per unit of risk. FLOW TRADERS LTD is currently generating about 0.01 per unit of risk. If you would invest  1,329  in CARSALESCOM on October 4, 2024 and sell it today you would earn a total of  851.00  from holding CARSALESCOM or generate 64.03% return on investment over 90 days.

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

CARSALESCOM  vs.  FLOW TRADERS LTD

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, CARSALES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

FLOW TRADERS LTD

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FLOW TRADERS LTD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FLOW TRADERS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CARSALES and FLOW TRADERS

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

The idea behind CARSALESCOM and FLOW TRADERS LTD 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.