Correlation Between AutoCanada and Vroom

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

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

Diversification Opportunities for AutoCanada and Vroom

-0.37

Correlation Coefficient

AutoCanada  Vroom

Very good diversification

The 3 months correlation between AutoCanada and Vroom is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding AutoCanada and Vroom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vroom Inc and AutoCanada 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 AutoCanada are associated (or correlated) with Vroom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vroom Inc has no effect on the direction of AutoCanada i.e., AutoCanada and Vroom go up and down completely randomly.

Pair Corralation between AutoCanada and Vroom

Assuming the 90 days horizon AutoCanada is expected to generate 0.19 times more return on investment than Vroom. However, AutoCanada is 5.16 times less risky than Vroom. It trades about 0.19 of its potential returns per unit of risk. Vroom Inc is currently generating about -0.04 per unit of risk. If you would invest  1,111  in AutoCanada on September 5, 2024 and sell it today you would earn a total of  218.00  from holding AutoCanada or generate 19.62% return on investment over 90 days.

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

AutoCanada  vs.  Vroom Inc

AutoCanada

Risk-Adjusted Performance

14 of 100

Good

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

Vroom Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vroom Inc 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 basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with AutoCanada and Vroom

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

The idea behind AutoCanada and Vroom Inc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.