Correlation Between Carsales and ChoiceOne Financial

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

By analyzing existing cross correlation between CarsalesCom Ltd ADR and ChoiceOne Financial Services, you can compare the effects of market volatilities on Carsales and ChoiceOne Financial 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 ChoiceOne Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and ChoiceOne Financial.

Diversification Opportunities for Carsales and ChoiceOne Financial

-0.19

Correlation Coefficient

Carsales  ChoiceOne Financial

Good diversification

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

Pair Corralation between Carsales and ChoiceOne Financial

Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to generate 0.51 times more return on investment than ChoiceOne Financial. However, CarsalesCom Ltd ADR is 1.97 times less risky than ChoiceOne Financial. It trades about -0.2 of its potential returns per unit of risk. ChoiceOne Financial Services is currently generating about -0.19 per unit of risk. If you would invest  4,567  in CarsalesCom Ltd ADR on January 20, 2024 and sell it today you would lose (326.00) from holding CarsalesCom Ltd ADR or give up 7.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  ChoiceOne Financial Services

CarsalesCom ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Carsales is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ChoiceOne Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChoiceOne Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Carsales and ChoiceOne Financial

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

The idea behind CarsalesCom Ltd ADR and ChoiceOne Financial Services 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.