Correlation Between CARSALESCOM and Evolution

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

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

Diversification Opportunities for CARSALESCOM and Evolution

-0.4

Correlation Coefficient

CARSALESCOM  Evolution

Very good diversification

The 3 months correlation between CARSALESCOM and Evolution is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Evolution AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution AB and CARSALESCOM 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 CARSALESCOM are associated (or correlated) with Evolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution AB has no effect on the direction of CARSALESCOM i.e., CARSALESCOM and Evolution go up and down completely randomly.

Pair Corralation between CARSALESCOM and Evolution

Assuming the 90 days trading horizon CARSALESCOM is expected to generate 0.68 times more return on investment than Evolution. However, CARSALESCOM is 1.47 times less risky than Evolution. It trades about 0.04 of its potential returns per unit of risk. Evolution AB is currently generating about -0.06 per unit of risk. If you would invest  2,220  in CARSALESCOM on September 15, 2024 and sell it today you would earn a total of  80.00  from holding CARSALESCOM or generate 3.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

CARSALESCOM  vs.  Evolution AB

CARSALESCOM

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Evolution AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CARSALESCOM and Evolution

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

The idea behind CARSALESCOM and Evolution AB 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.