Correlation Between Match and TrueCar

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

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

Diversification Opportunities for Match and TrueCar

-0.58

Correlation Coefficient

Match  TrueCar

Excellent diversification

The 3 months correlation between Match and TrueCar is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Match Group and TrueCar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrueCar and Match 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 Match Group are associated (or correlated) with TrueCar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrueCar has no effect on the direction of Match i.e., Match and TrueCar go up and down completely randomly.

Pair Corralation between Match and TrueCar

Given the investment horizon of 90 days Match Group is expected to under-perform the TrueCar. But the stock apears to be less risky and, when comparing its historical volatility, Match Group is 1.07 times less risky than TrueCar. The stock trades about -0.05 of its potential returns per unit of risk. The TrueCar is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  312.00  in TrueCar on September 5, 2024 and sell it today you would earn a total of  145.00  from holding TrueCar or generate 46.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Match Group  vs.  TrueCar

Match Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Match Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

TrueCar

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TrueCar are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, TrueCar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Match and TrueCar

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

The idea behind Match Group and TrueCar 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.