Correlation Between Carsales and INTERNET INJPADR

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

By analyzing existing cross correlation between CarsalesCom and INTERNET INJPADR 1, you can compare the effects of market volatilities on Carsales and INTERNET INJPADR 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 INTERNET INJPADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and INTERNET INJPADR.

Diversification Opportunities for Carsales and INTERNET INJPADR

0.55

Correlation Coefficient

Carsales  INTERNET INJPADR

Very weak diversification

The 3 months correlation between Carsales and INTERNET is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and INTERNET INJPADR 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERNET INJPADR 1 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 INTERNET INJPADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERNET INJPADR 1 has no effect on the direction of Carsales i.e., Carsales and INTERNET INJPADR go up and down completely randomly.

Pair Corralation between Carsales and INTERNET INJPADR

Assuming the 90 days horizon CarsalesCom is expected to generate 0.71 times more return on investment than INTERNET INJPADR. However, CarsalesCom is 1.41 times less risky than INTERNET INJPADR. It trades about -0.1 of its potential returns per unit of risk. INTERNET INJPADR 1 is currently generating about -0.11 per unit of risk. If you would invest  2,195  in CarsalesCom on December 22, 2024 and sell it today you would lose (245.00) from holding CarsalesCom or give up 11.16% of portfolio value over 90 days.

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

CarsalesCom  vs.  INTERNET INJPADR 1

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

INTERNET INJPADR 1

Risk-Adjusted Performance

Very Weak

Over the last 90 days INTERNET INJPADR 1 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.

Pair Trading with Carsales and INTERNET INJPADR

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

The idea behind CarsalesCom and INTERNET INJPADR 1 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.