Correlation Between Carsales and DexCom

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

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

Diversification Opportunities for Carsales and DexCom

0.88

Correlation Coefficient

Carsales  DexCom

Very poor diversification

The 3 months correlation between Carsales and DexCom is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc 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 DexCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DexCom Inc has no effect on the direction of Carsales i.e., Carsales and DexCom go up and down completely randomly.

Pair Corralation between Carsales and DexCom

Assuming the 90 days horizon CarsalesCom is expected to generate 0.67 times more return on investment than DexCom. However, CarsalesCom is 1.49 times less risky than DexCom. It trades about -0.12 of its potential returns per unit of risk. DexCom Inc is currently generating about -0.1 per unit of risk. If you would invest  2,155  in CarsalesCom on December 30, 2024 and sell it today you would lose (295.00) from holding CarsalesCom or give up 13.69% of portfolio value over 90 days.

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

CarsalesCom  vs.  DexCom Inc

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.

DexCom Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days DexCom Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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.

Pair Trading with Carsales and DexCom

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

The idea behind CarsalesCom and DexCom Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.