Correlation Between Cars and Sincerity Applied

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

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

Diversification Opportunities for Cars and Sincerity Applied

-0.23

Correlation Coefficient

Cars  Sincerity Applied

Very good diversification

The 3 months correlation between Cars and Sincerity is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Sincerity Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sincerity Applied and Cars 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 Cars Inc are associated (or correlated) with Sincerity Applied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sincerity Applied has no effect on the direction of Cars i.e., Cars and Sincerity Applied go up and down completely randomly.

Pair Corralation between Cars and Sincerity Applied

Given the investment horizon of 90 days Cars is expected to generate 63.23 times less return on investment than Sincerity Applied. But when comparing it to its historical volatility, Cars Inc is 22.59 times less risky than Sincerity Applied. It trades about 0.04 of its potential returns per unit of risk. Sincerity Applied Materials is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  71.00  in Sincerity Applied Materials on January 17, 2024 and sell it today you would lose (67.11) from holding Sincerity Applied Materials or give up 94.52% of portfolio value over 90 days.

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

Cars Inc  vs.  Sincerity Applied Materials

Cars Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cars is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Sincerity Applied

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sincerity Applied Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Sincerity Applied exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cars and Sincerity Applied

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

The idea behind Cars Inc and Sincerity Applied Materials 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.