Correlation Between CarsalesCom and CIFI Holdings

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

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

Diversification Opportunities for CarsalesCom and CIFI Holdings

-0.31

Correlation Coefficient

CarsalesCom  CIFI Holdings

Very good diversification

The 3 months correlation between CarsalesCom and CIFI is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and CIFI Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIFI Holdings 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 CIFI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIFI Holdings has no effect on the direction of CarsalesCom i.e., CarsalesCom and CIFI Holdings go up and down completely randomly.

Pair Corralation between CarsalesCom and CIFI Holdings

Assuming the 90 days horizon CarsalesCom is expected to generate 41.38 times less return on investment than CIFI Holdings. But when comparing it to its historical volatility, CarsalesCom is 7.3 times less risky than CIFI Holdings. It trades about 0.01 of its potential returns per unit of risk. CIFI Holdings Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3.30  in CIFI Holdings Co on September 27, 2024 and sell it today you would lose (0.15) from holding CIFI Holdings Co or give up 4.55% of portfolio value over 90 days.

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

CarsalesCom  vs.  CIFI Holdings Co

CarsalesCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CarsalesCom is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

CIFI Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CIFI Holdings Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CIFI Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CarsalesCom and CIFI Holdings

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

The idea behind CarsalesCom and CIFI Holdings Co 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.