Correlation Between Carsales and Korn Ferry

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

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

Diversification Opportunities for Carsales and Korn Ferry

0.87

Correlation Coefficient

Carsales  Korn Ferry

Very poor diversification

The 3 months correlation between Carsales and Korn is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and Korn Ferry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korn Ferry 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 Korn Ferry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korn Ferry has no effect on the direction of Carsales i.e., Carsales and Korn Ferry go up and down completely randomly.

Pair Corralation between Carsales and Korn Ferry

Assuming the 90 days trading horizon Carsales is expected to under-perform the Korn Ferry. But the stock apears to be less risky and, when comparing its historical volatility, Carsales is 2.45 times less risky than Korn Ferry. The stock trades about -0.47 of its potential returns per unit of risk. The Korn Ferry is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  7,060  in Korn Ferry on September 23, 2024 and sell it today you would lose (597.00) from holding Korn Ferry or give up 8.46% of portfolio value over 90 days.

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

Carsales  vs.  Korn Ferry

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.

Korn Ferry

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Carsales and Korn Ferry 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.