Correlation Between Carsales and Anheuser-Busch InBev

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

By analyzing existing cross correlation between CarsalesCom and Anheuser Busch InBev SANV, you can compare the effects of market volatilities on Carsales and Anheuser-Busch InBev 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 Anheuser-Busch InBev. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Anheuser-Busch InBev.

Diversification Opportunities for Carsales and Anheuser-Busch InBev

-0.29

Correlation Coefficient

Carsales  Anheuser-Busch InBev

Very good diversification

The 3 months correlation between Carsales and Anheuser-Busch is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Anheuser Busch InBev SANV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch InBev 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 Anheuser-Busch InBev. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch InBev has no effect on the direction of Carsales i.e., Carsales and Anheuser-Busch InBev go up and down completely randomly.

Pair Corralation between Carsales and Anheuser-Busch InBev

Assuming the 90 days horizon CarsalesCom is expected to under-perform the Anheuser-Busch InBev. But the stock apears to be less risky and, when comparing its historical volatility, CarsalesCom is 1.02 times less risky than Anheuser-Busch InBev. The stock trades about -0.15 of its potential returns per unit of risk. The Anheuser Busch InBev SANV is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,132  in Anheuser Busch InBev SANV on December 3, 2024 and sell it today you would earn a total of  716.00  from holding Anheuser Busch InBev SANV or generate 13.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

CarsalesCom  vs.  Anheuser Busch InBev SANV

CarsalesCom

Risk-Adjusted Performance

Very Weak

Over the last 90 days CarsalesCom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Anheuser Busch InBev

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anheuser Busch InBev SANV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental drivers, Anheuser-Busch InBev reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carsales and Anheuser-Busch InBev

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

The idea behind CarsalesCom and Anheuser Busch InBev SANV 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.