Correlation Between MoneysupermarketCom and Cars

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

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

Diversification Opportunities for MoneysupermarketCom and Cars

0.49

Correlation Coefficient

MoneysupermarketCom  Cars

Very weak diversification

The 3 months correlation between MoneysupermarketCom and Cars is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding MoneysupermarketCom Group PLC and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and MoneysupermarketCom 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 MoneysupermarketCom Group PLC 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 MoneysupermarketCom i.e., MoneysupermarketCom and Cars go up and down completely randomly.

Pair Corralation between MoneysupermarketCom and Cars

Assuming the 90 days trading horizon MoneysupermarketCom Group PLC is expected to under-perform the Cars. But the stock apears to be less risky and, when comparing its historical volatility, MoneysupermarketCom Group PLC is 2.04 times less risky than Cars. The stock trades about -0.11 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 22, 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	Weak
Accuracy	66.15%
Values	Daily Returns

MoneysupermarketCom Group PLC  vs.  Cars Inc

MoneysupermarketCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MoneysupermarketCom Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 MoneysupermarketCom and Cars

The main advantage of trading using opposite MoneysupermarketCom and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MoneysupermarketCom 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 MoneysupermarketCom Group PLC 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.