Correlation Between Empire Metals and Cars

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

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

Diversification Opportunities for Empire Metals and Cars

0.31

Correlation Coefficient

Empire Metals  Cars

Weak diversification

The 3 months correlation between Empire and Cars is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and Empire Metals 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 Empire Metals Limited are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Empire Metals i.e., Empire Metals and Cars go up and down completely randomly.

Pair Corralation between Empire Metals and Cars

Assuming the 90 days trading horizon Empire Metals Limited is expected to under-perform the Cars. But the stock apears to be less risky and, when comparing its historical volatility, Empire Metals Limited is 1.07 times less risky than Cars. The stock trades about -0.15 of its potential returns per unit of risk. The Cars Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,758  in Cars Inc on September 21, 2024 and sell it today you would lose (12.00) from holding Cars Inc or give up 0.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	65.63%
Values	Daily Returns

Empire Metals Limited  vs.  Cars Inc

Empire Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cars Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Empire Metals and Cars

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

The idea behind Empire Metals Limited and Cars 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.