Correlation Between CARSALESCOM and NOV

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

By analyzing existing cross correlation between CARSALESCOM and NOV Inc, you can compare the effects of market volatilities on CARSALESCOM and NOV 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 NOV. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARSALESCOM and NOV.

Diversification Opportunities for CARSALESCOM and NOV

0.75

Correlation Coefficient

CARSALESCOM  NOV

Poor diversification

The 3 months correlation between CARSALESCOM and NOV is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and NOV Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOV Inc 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 NOV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOV Inc has no effect on the direction of CARSALESCOM i.e., CARSALESCOM and NOV go up and down completely randomly.

Pair Corralation between CARSALESCOM and NOV

Assuming the 90 days trading horizon CARSALESCOM is expected to generate 0.79 times more return on investment than NOV. However, CARSALESCOM is 1.26 times less risky than NOV. It trades about 0.05 of its potential returns per unit of risk. NOV Inc is currently generating about 0.03 per unit of risk. If you would invest  2,220  in CARSALESCOM on September 14, 2024 and sell it today you would earn a total of  100.00  from holding CARSALESCOM or generate 4.5% return on investment over 90 days.

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

CARSALESCOM  vs.  NOV Inc

CARSALESCOM

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 4 (%) 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.

NOV Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NOV is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CARSALESCOM and NOV

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

The idea behind CARSALESCOM and NOV 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.