Correlation Between Carsales and ACCO Brands

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

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

Diversification Opportunities for Carsales and ACCO Brands

0.76

Correlation Coefficient

Carsales  ACCO Brands

Poor diversification

The 3 months correlation between Carsales and ACCO is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and ACCO Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACCO Brands 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 ACCO Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACCO Brands has no effect on the direction of Carsales i.e., Carsales and ACCO Brands go up and down completely randomly.

Pair Corralation between Carsales and ACCO Brands

Assuming the 90 days horizon CarsalesCom is expected to generate 0.68 times more return on investment than ACCO Brands. However, CarsalesCom is 1.46 times less risky than ACCO Brands. It trades about 0.08 of its potential returns per unit of risk. ACCO Brands is currently generating about 0.01 per unit of risk. If you would invest  1,310  in CarsalesCom on October 11, 2024 and sell it today you would earn a total of  910.00  from holding CarsalesCom or generate 69.47% return on investment over 90 days.

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

CarsalesCom  vs.  ACCO Brands

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.

ACCO Brands

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ACCO Brands are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ACCO Brands may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Carsales and ACCO Brands

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

The idea behind CarsalesCom and ACCO Brands 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..