Correlation Between Carsales and Wineco Productions

Can any of the company-specific risk be diversified away by investing in both Carsales and Wineco Productions 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 Wineco Productions 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 Wineco Productions, you can compare the effects of market volatilities on Carsales and Wineco Productions 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 Wineco Productions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Wineco Productions.

Diversification Opportunities for Carsales and Wineco Productions

0.0

Correlation Coefficient

Carsales  Wineco Productions

Pay attention - limited upside

The 3 months correlation between Carsales and Wineco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and Wineco Productions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wineco Productions 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 Wineco Productions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wineco Productions has no effect on the direction of Carsales i.e., Carsales and Wineco Productions go up and down completely randomly.

Pair Corralation between Carsales and Wineco Productions

If you would invest  0.01  in Wineco Productions on January 26, 2024 and sell it today you would earn a total of  0.00  from holding Wineco Productions or generate 0.0% return on investment over 90 days.

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

CarsalesCom Ltd ADR  vs.  Wineco Productions

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, Carsales is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Wineco Productions

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Carsales and Wineco Productions

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

The idea behind CarsalesCom Ltd ADR and Wineco Productions 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.