Correlation Between Carsales and Peak Resources

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

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

Diversification Opportunities for Carsales and Peak Resources

0.78

Correlation Coefficient

Carsales  Peak Resources

Poor diversification

The 3 months correlation between Carsales and Peak is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and Peak Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peak Resources 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 Peak Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peak Resources has no effect on the direction of Carsales i.e., Carsales and Peak Resources go up and down completely randomly.

Pair Corralation between Carsales and Peak Resources

Assuming the 90 days trading horizon Carsales is expected to under-perform the Peak Resources. But the stock apears to be less risky and, when comparing its historical volatility, Carsales is 3.83 times less risky than Peak Resources. The stock trades about -0.11 of its potential returns per unit of risk. The Peak Resources Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6.30  in Peak Resources Limited on December 29, 2024 and sell it today you would lose (0.50) from holding Peak Resources Limited or give up 7.94% of portfolio value over 90 days.

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

Carsales  vs.  Peak Resources Limited

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Peak Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Peak Resources Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Peak Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Carsales and Peak Resources

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

The idea behind Carsales and Peak Resources 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.