Correlation Between Guess and Americas Car
Can any of the company-specific risk be diversified away by investing in both Guess and Americas Car 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 Guess and Americas Car into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guess Inc and Americas Car Mart, you can compare the effects of market volatilities on Guess and Americas Car 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 Guess with a short position of Americas Car. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guess and Americas Car.
Diversification Opportunities for Guess and Americas Car
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Guess and Americas is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Guess Inc and Americas Car Mart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americas Car Mart and Guess 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 Guess Inc are associated (or correlated) with Americas Car. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americas Car Mart has no effect on the direction of Guess i.e., Guess and Americas Car go up and down completely randomly.
Pair Corralation between Guess and Americas Car
Considering the 90-day investment horizon Guess Inc is expected to under-perform the Americas Car. But the stock apears to be less risky and, when comparing its historical volatility, Guess Inc is 1.26 times less risky than Americas Car. The stock trades about -0.2 of its potential returns per unit of risk. The Americas Car Mart is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,841 in Americas Car Mart on February 24, 2024 and sell it today you would earn a total of 234.00 from holding Americas Car Mart or generate 4.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Guess Inc vs. Americas Car Mart
Performance |
Timeline |
Guess Inc |
Americas Car Mart |
Guess and Americas Car Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Guess and Americas Car
The main advantage of trading using opposite Guess and Americas Car positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guess position performs unexpectedly, Americas Car 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 Americas Car will offset losses from the drop in Americas Car's long position.The idea behind Guess Inc and Americas Car Mart 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.Americas Car vs. Sonic Automotive | Americas Car vs. Lithia Motors | Americas Car vs. AutoNation | Americas Car vs. Asbury Automotive Group |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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