Correlation Between Tinybeans Group and CarsalesCom

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

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

Diversification Opportunities for Tinybeans Group and CarsalesCom

-0.34

Correlation Coefficient

Tinybeans Group  CarsalesCom

Very good diversification

The 3 months correlation between Tinybeans and CarsalesCom is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Tinybeans Group Limited and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR and Tinybeans Group 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 Tinybeans Group Limited 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 ADR has no effect on the direction of Tinybeans Group i.e., Tinybeans Group and CarsalesCom go up and down completely randomly.

Pair Corralation between Tinybeans Group and CarsalesCom

Assuming the 90 days horizon Tinybeans Group Limited is expected to generate 18.16 times more return on investment than CarsalesCom. However, Tinybeans Group is 18.16 times more volatile than CarsalesCom Ltd ADR. It trades about 0.09 of its potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.06 per unit of risk. If you would invest  1.00  in Tinybeans Group Limited on September 3, 2024 and sell it today you would lose (0.50) from holding Tinybeans Group Limited or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Tinybeans Group Limited  vs.  CarsalesCom Ltd ADR

Tinybeans Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tinybeans Group Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Tinybeans Group reported solid returns over the last few months and may actually be approaching a breakup point.

CarsalesCom ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, CarsalesCom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tinybeans Group and CarsalesCom

The main advantage of trading using opposite Tinybeans Group and CarsalesCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tinybeans Group 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 Tinybeans Group Limited and CarsalesCom Ltd ADR 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.