Correlation Between Carsales and MongoDB

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

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

Diversification Opportunities for Carsales and MongoDB

0.86

Correlation Coefficient

Carsales  MongoDB

Very poor diversification

The 3 months correlation between Carsales and MongoDB is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and MongoDB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MongoDB 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 MongoDB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MongoDB has no effect on the direction of Carsales i.e., Carsales and MongoDB go up and down completely randomly.

Pair Corralation between Carsales and MongoDB

Assuming the 90 days horizon CarsalesCom is expected to generate 0.43 times more return on investment than MongoDB. However, CarsalesCom is 2.35 times less risky than MongoDB. It trades about 0.08 of its potential returns per unit of risk. MongoDB is currently generating about 0.03 per unit of risk. If you would invest  1,291  in CarsalesCom on October 4, 2024 and sell it today you would earn a total of  889.00  from holding CarsalesCom or generate 68.86% return on investment over 90 days.

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

CarsalesCom  vs.  MongoDB

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. Despite nearly stable basic indicators, Carsales is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MongoDB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MongoDB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MongoDB is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carsales and MongoDB

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

The idea behind CarsalesCom and MongoDB 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..