Correlation Between Foothills Exploration and Carvana

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

By analyzing existing cross correlation between Foothills Exploration and Carvana Co, you can compare the effects of market volatilities on Foothills Exploration and Carvana 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 Foothills Exploration with a short position of Carvana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foothills Exploration and Carvana.

Diversification Opportunities for Foothills Exploration and Carvana

-0.35

Correlation Coefficient

Foothills Exploration  Carvana

Very good diversification

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

Pair Corralation between Foothills Exploration and Carvana

Given the investment horizon of 90 days Foothills Exploration is expected to generate 4.46 times more return on investment than Carvana. However, Foothills Exploration is 4.46 times more volatile than Carvana Co. It trades about 0.15 of its potential returns per unit of risk. Carvana Co is currently generating about 0.15 per unit of risk. If you would invest  0.02  in Foothills Exploration on January 26, 2024 and sell it today you would lose (0.01) from holding Foothills Exploration or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Foothills Exploration  vs.  Carvana Co

Foothills Exploration

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Foothills Exploration are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Foothills Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Carvana

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Carvana sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Foothills Exploration and Carvana

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

The idea behind Foothills Exploration and Carvana Co 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.