Correlation Between CarsalesCom and American Education

Can any of the company-specific risk be diversified away by investing in both CarsalesCom and American Education 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 CarsalesCom and American Education 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 American Education Center, you can compare the effects of market volatilities on CarsalesCom and American Education 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 CarsalesCom with a short position of American Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarsalesCom and American Education.

Diversification Opportunities for CarsalesCom and American Education

-0.26

Correlation Coefficient

CarsalesCom  American Education

Very good diversification

The 3 months correlation between CarsalesCom and American is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and American Education Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Education Center and CarsalesCom 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 American Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Education Center has no effect on the direction of CarsalesCom i.e., CarsalesCom and American Education go up and down completely randomly.

Pair Corralation between CarsalesCom and American Education

If you would invest  4,892  in CarsalesCom Ltd ADR on September 5, 2024 and sell it today you would earn a total of  515.00  from holding CarsalesCom Ltd ADR or generate 10.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  American Education Center

CarsalesCom ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CarsalesCom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Education Center

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Education Center has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, American Education is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CarsalesCom and American Education

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

The idea behind CarsalesCom Ltd ADR and American Education Center 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.