Correlation Between CarsalesCom and NervGen Pharma

Can any of the company-specific risk be diversified away by investing in both CarsalesCom and NervGen Pharma 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 NervGen Pharma 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 NervGen Pharma Corp, you can compare the effects of market volatilities on CarsalesCom and NervGen Pharma 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 NervGen Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarsalesCom and NervGen Pharma.

Diversification Opportunities for CarsalesCom and NervGen Pharma

0.49

Correlation Coefficient

CarsalesCom  NervGen Pharma

Very weak diversification

The 3 months correlation between CarsalesCom and NervGen is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and NervGen Pharma Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NervGen Pharma Corp 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 NervGen Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NervGen Pharma Corp has no effect on the direction of CarsalesCom i.e., CarsalesCom and NervGen Pharma go up and down completely randomly.

Pair Corralation between CarsalesCom and NervGen Pharma

Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to generate 0.52 times more return on investment than NervGen Pharma. However, CarsalesCom Ltd ADR is 1.93 times less risky than NervGen Pharma. It trades about 0.08 of its potential returns per unit of risk. NervGen Pharma Corp is currently generating about 0.01 per unit of risk. If you would invest  4,851  in CarsalesCom Ltd ADR on September 13, 2024 and sell it today you would earn a total of  556.00  from holding CarsalesCom Ltd ADR or generate 11.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  NervGen Pharma Corp

CarsalesCom ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, CarsalesCom showed solid returns over the last few months and may actually be approaching a breakup point.

NervGen Pharma Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NervGen Pharma Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NervGen Pharma is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CarsalesCom and NervGen Pharma

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

The idea behind CarsalesCom Ltd ADR and NervGen Pharma Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.