Correlation Between Snap and Auto Trader

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

By analyzing existing cross correlation between Snap Inc and Auto Trader Group, you can compare the effects of market volatilities on Snap and Auto Trader 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 Snap with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Auto Trader.

Diversification Opportunities for Snap and Auto Trader

0.19

Correlation Coefficient

Snap  Auto Trader

Average diversification

The 3 months correlation between Snap and Auto is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Snap 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 Snap Inc are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Snap i.e., Snap and Auto Trader go up and down completely randomly.

Pair Corralation between Snap and Auto Trader

Given the investment horizon of 90 days Snap Inc is expected to generate 4.23 times more return on investment than Auto Trader. However, Snap is 4.23 times more volatile than Auto Trader Group. It trades about 0.21 of its potential returns per unit of risk. Auto Trader Group is currently generating about -0.08 per unit of risk. If you would invest  1,125  in Snap Inc on January 30, 2024 and sell it today you would earn a total of  330.00  from holding Snap Inc or generate 29.33% return on investment over 90 days.

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

Snap Inc  vs.  Auto Trader Group

Snap Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snap Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Snap is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Snap and Auto Trader

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

The idea behind Snap Inc and Auto Trader Group 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.