Correlation Between EXPRESS and Cars

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

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

Diversification Opportunities for EXPRESS and Cars

-0.43

Correlation Coefficient

EXPRESS  Cars

Very good diversification

The 3 months correlation between EXPRESS and Cars is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding EXPRESS SCRIPTS HLDG and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and EXPRESS 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 EXPRESS SCRIPTS HLDG 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 EXPRESS i.e., EXPRESS and Cars go up and down completely randomly.

Pair Corralation between EXPRESS and Cars

Assuming the 90 days trading horizon EXPRESS is expected to generate 50.77 times less return on investment than Cars. But when comparing it to its historical volatility, EXPRESS SCRIPTS HLDG is 3.07 times less risky than Cars. It trades about 0.01 of its potential returns per unit of risk. Cars Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,708  in Cars Inc on September 12, 2024 and sell it today you would earn a total of  226.00  from holding Cars Inc or generate 13.23% return on investment over 90 days.

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

EXPRESS SCRIPTS HLDG  vs.  Cars Inc

EXPRESS SCRIPTS HLDG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EXPRESS SCRIPTS HLDG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EXPRESS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cars Inc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Cars unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EXPRESS and Cars

The main advantage of trading using opposite EXPRESS and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EXPRESS 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 EXPRESS SCRIPTS HLDG 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.