Correlation Between Wabash National and CarsalesCom

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

By analyzing existing cross correlation between Wabash National and CarsalesCom Ltd ADR, you can compare the effects of market volatilities on Wabash National and CarsalesCom 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 Wabash National with a short position of CarsalesCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wabash National and CarsalesCom.

Diversification Opportunities for Wabash National and CarsalesCom

0.35

Correlation Coefficient

Wabash National  CarsalesCom

Weak diversification

The 3 months correlation between Wabash and CarsalesCom is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR and Wabash National 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 Wabash National are associated (or correlated) with CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of Wabash National i.e., Wabash National and CarsalesCom go up and down completely randomly.

Pair Corralation between Wabash National and CarsalesCom

Considering the 90-day investment horizon Wabash National is expected to under-perform the CarsalesCom. In addition to that, Wabash National is 1.07 times more volatile than CarsalesCom Ltd ADR. It trades about -0.13 of its total potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.23 per unit of volatility. If you would invest  4,840  in CarsalesCom Ltd ADR on September 20, 2024 and sell it today you would earn a total of  567.00  from holding CarsalesCom Ltd ADR or generate 11.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Wabash National  vs.  CarsalesCom Ltd ADR

Wabash National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

CarsalesCom ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, CarsalesCom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wabash National and CarsalesCom

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

The idea behind Wabash National and CarsalesCom Ltd ADR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.