Correlation Between Carsales and SIERRA METALS

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

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

Diversification Opportunities for Carsales and SIERRA METALS

-0.8

Correlation Coefficient

Carsales  SIERRA METALS

Pay attention - limited upside

The 3 months correlation between Carsales and SIERRA is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and SIERRA METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIERRA METALS 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 SIERRA METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIERRA METALS has no effect on the direction of Carsales i.e., Carsales and SIERRA METALS go up and down completely randomly.

Pair Corralation between Carsales and SIERRA METALS

Assuming the 90 days horizon Carsales is expected to generate 1.66 times less return on investment than SIERRA METALS. But when comparing it to its historical volatility, CarsalesCom is 2.19 times less risky than SIERRA METALS. It trades about 0.08 of its potential returns per unit of risk. SIERRA METALS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  28.00  in SIERRA METALS on October 4, 2024 and sell it today you would earn a total of  28.00  from holding SIERRA METALS or generate 100.0% return on investment over 90 days.

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

CarsalesCom  vs.  SIERRA METALS

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.

SIERRA METALS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SIERRA METALS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SIERRA METALS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Carsales and SIERRA METALS

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

The idea behind CarsalesCom and SIERRA METALS 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.