Correlation Between Carsales and ELEMENT FLEET

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

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

Diversification Opportunities for Carsales and ELEMENT FLEET

0.52

Correlation Coefficient

Carsales  ELEMENT FLEET

Very weak diversification

The 3 months correlation between Carsales and ELEMENT is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and ELEMENT FLEET MGMT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELEMENT FLEET MGMT 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 Carsales are associated (or correlated) with ELEMENT FLEET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELEMENT FLEET MGMT has no effect on the direction of Carsales i.e., Carsales and ELEMENT FLEET go up and down completely randomly.

Pair Corralation between Carsales and ELEMENT FLEET

Assuming the 90 days trading horizon Carsales is expected to under-perform the ELEMENT FLEET. In addition to that, Carsales is 1.24 times more volatile than ELEMENT FLEET MGMT. It trades about -0.1 of its total potential returns per unit of risk. ELEMENT FLEET MGMT is currently generating about 0.0 per unit of volatility. If you would invest  1,890  in ELEMENT FLEET MGMT on December 31, 2024 and sell it today you would lose (20.00) from holding ELEMENT FLEET MGMT or give up 1.06% of portfolio value over 90 days.

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

Carsales  vs.  ELEMENT FLEET MGMT

Carsales

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carsales has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ELEMENT FLEET MGMT

Risk-Adjusted Performance

Very Weak

Over the last 90 days ELEMENT FLEET MGMT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ELEMENT FLEET 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 ELEMENT FLEET

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

The idea behind Carsales and ELEMENT FLEET MGMT 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.