Correlation Between Carsales and AGF Management

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

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

Diversification Opportunities for Carsales and AGF Management

0.56

Correlation Coefficient

Carsales  AGF Management

Very weak diversification

The 3 months correlation between Carsales and AGF is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management 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 AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of Carsales i.e., Carsales and AGF Management go up and down completely randomly.

Pair Corralation between Carsales and AGF Management

Assuming the 90 days trading horizon Carsales is expected to under-perform the AGF Management. In addition to that, Carsales is 1.03 times more volatile than AGF Management Limited. It trades about -0.47 of its total potential returns per unit of risk. AGF Management Limited is currently generating about -0.19 per unit of volatility. If you would invest  725.00  in AGF Management Limited on September 23, 2024 and sell it today you would lose (35.00) from holding AGF Management Limited or give up 4.83% of portfolio value over 90 days.

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

Carsales  vs.  AGF Management Limited

Carsales

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Carsales is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AGF Management

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AGF Management reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carsales and AGF Management

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

The idea behind Carsales and AGF Management Limited 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.