Correlation Between DexCom and CarsalesCom

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

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

Diversification Opportunities for DexCom and CarsalesCom

0.83

Correlation Coefficient

DexCom  CarsalesCom

Very poor diversification

The 3 months correlation between DexCom and CarsalesCom is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom and DexCom 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 DexCom Inc are associated (or correlated) with CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of DexCom i.e., DexCom and CarsalesCom go up and down completely randomly.

Pair Corralation between DexCom and CarsalesCom

Assuming the 90 days horizon DexCom Inc is expected to generate 1.39 times more return on investment than CarsalesCom. However, DexCom is 1.39 times more volatile than CarsalesCom. It trades about 0.14 of its potential returns per unit of risk. CarsalesCom is currently generating about 0.1 per unit of risk. If you would invest  6,188  in DexCom Inc on September 13, 2024 and sell it today you would earn a total of  1,210  from holding DexCom Inc or generate 19.55% return on investment over 90 days.

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

DexCom Inc  vs.  CarsalesCom

DexCom Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DexCom reported solid returns over the last few months and may actually be approaching a breakup point.

CarsalesCom

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CarsalesCom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with DexCom and CarsalesCom

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

The idea behind DexCom Inc and CarsalesCom 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.