Correlation Between THORNEY TECHS and Carsales

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

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

Diversification Opportunities for THORNEY TECHS and Carsales

0.27

Correlation Coefficient

THORNEY TECHS  Carsales

Modest diversification

The 3 months correlation between THORNEY and Carsales is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding THORNEY TECHS LTD and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales and THORNEY TECHS 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 THORNEY TECHS LTD are associated (or correlated) with Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of THORNEY TECHS i.e., THORNEY TECHS and Carsales go up and down completely randomly.

Pair Corralation between THORNEY TECHS and Carsales

Assuming the 90 days horizon THORNEY TECHS LTD is expected to generate 2.7 times more return on investment than Carsales. However, THORNEY TECHS is 2.7 times more volatile than Carsales. It trades about 0.03 of its potential returns per unit of risk. Carsales is currently generating about 0.04 per unit of risk. If you would invest  7.35  in THORNEY TECHS LTD on September 15, 2024 and sell it today you would earn a total of  0.30  from holding THORNEY TECHS LTD or generate 4.08% return on investment over 90 days.

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

THORNEY TECHS LTD  vs.  Carsales

THORNEY TECHS LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in THORNEY TECHS LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, THORNEY TECHS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Carsales

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carsales are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Carsales 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 THORNEY TECHS and Carsales

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

The idea behind THORNEY TECHS LTD and Carsales 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.