Correlation Between Various Eateries and Cars

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

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

Diversification Opportunities for Various Eateries and Cars

-0.11

Correlation Coefficient

Various Eateries  Cars

Good diversification

The 3 months correlation between Various and Cars is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Various Eateries PLC and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and Various Eateries 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 Various Eateries 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 Various Eateries i.e., Various Eateries and Cars go up and down completely randomly.

Pair Corralation between Various Eateries and Cars

Assuming the 90 days trading horizon Various Eateries PLC is expected to under-perform the Cars. But the stock apears to be less risky and, when comparing its historical volatility, Various Eateries PLC is 5.94 times less risky than Cars. The stock trades about -0.18 of its potential returns per unit of risk. The Cars Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,654  in Cars Inc on September 28, 2024 and sell it today you would earn a total of  56.00  from holding Cars Inc or generate 3.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

Various Eateries PLC  vs.  Cars Inc

Various Eateries PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Various Eateries PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Various Eateries is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cars Inc

Risk-Adjusted Performance

0 of 100

Insignificant

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 uncertain basic indicators, Cars may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Various Eateries and Cars

The main advantage of trading using opposite Various Eateries and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Various Eateries 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 Various Eateries 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.