Correlation Between Carsales and RESOLUTION MINERALS

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

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

Diversification Opportunities for Carsales and RESOLUTION MINERALS

0.06

Correlation Coefficient

Carsales  RESOLUTION MINERALS

Significant diversification

The 3 months correlation between Carsales and RESOLUTION is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and RESOLUTION MINERALS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RESOLUTION MINERALS LTD 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 RESOLUTION MINERALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RESOLUTION MINERALS LTD has no effect on the direction of Carsales i.e., Carsales and RESOLUTION MINERALS go up and down completely randomly.

Pair Corralation between Carsales and RESOLUTION MINERALS

Assuming the 90 days trading horizon Carsales is expected to generate 0.13 times more return on investment than RESOLUTION MINERALS. However, Carsales is 7.47 times less risky than RESOLUTION MINERALS. It trades about 0.04 of its potential returns per unit of risk. RESOLUTION MINERALS LTD is currently generating about -0.12 per unit of risk. If you would invest  2,220  in Carsales on September 17, 2024 and sell it today you would earn a total of  80.00  from holding Carsales or generate 3.6% return on investment over 90 days.

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

Carsales  vs.  RESOLUTION MINERALS LTD

Carsales

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carsales are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Carsales is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

RESOLUTION MINERALS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RESOLUTION MINERALS LTD 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Carsales and RESOLUTION MINERALS

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

The idea behind Carsales and RESOLUTION MINERALS LTD 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.