Correlation Between Sabio Holdings and Auto Trader

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

By analyzing existing cross correlation between Sabio Holdings and Auto Trader Group, you can compare the effects of market volatilities on Sabio Holdings and Auto Trader 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 Sabio Holdings with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sabio Holdings and Auto Trader.

Diversification Opportunities for Sabio Holdings and Auto Trader

-0.32

Correlation Coefficient

Sabio Holdings  Auto Trader

Very good diversification

The 3 months correlation between Sabio and Auto is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sabio Holdings and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Sabio Holdings 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 Sabio Holdings are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Sabio Holdings i.e., Sabio Holdings and Auto Trader go up and down completely randomly.

Pair Corralation between Sabio Holdings and Auto Trader

Assuming the 90 days horizon Sabio Holdings is expected to under-perform the Auto Trader. In addition to that, Sabio Holdings is 2.06 times more volatile than Auto Trader Group. It trades about -0.12 of its total potential returns per unit of risk. Auto Trader Group is currently generating about 0.08 per unit of volatility. If you would invest  240.00  in Auto Trader Group on March 16, 2024 and sell it today you would earn a total of  23.00  from holding Auto Trader Group or generate 9.58% return on investment over 90 days.

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

Sabio Holdings  vs.  Auto Trader Group

Sabio Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabio Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Auto Trader Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Auto Trader Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Auto Trader may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Sabio Holdings and Auto Trader

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

The idea behind Sabio Holdings and Auto Trader Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.