Correlation Between CarsalesCom and Radcom

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

Diversification Opportunities for CarsalesCom and Radcom

0.03

Correlation Coefficient

CarsalesCom  Radcom

Significant diversification

The 3 months correlation between CarsalesCom and Radcom is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of CarsalesCom i.e., CarsalesCom and Radcom go up and down completely randomly.

Pair Corralation between CarsalesCom and Radcom

Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to generate 0.87 times more return on investment than Radcom. However, CarsalesCom Ltd ADR is 1.15 times less risky than Radcom. It trades about 0.07 of its potential returns per unit of risk. Radcom is currently generating about 0.02 per unit of risk. If you would invest  2,853  in CarsalesCom Ltd ADR on September 4, 2024 and sell it today you would earn a total of  2,554  from holding CarsalesCom Ltd ADR or generate 89.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.89%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  Radcom

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.

Radcom

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CarsalesCom and Radcom

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

The idea behind CarsalesCom Ltd ADR and Radcom 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.