Correlation Between CarsalesCom and Fiserv

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

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

Diversification Opportunities for CarsalesCom and Fiserv

0.79

Correlation Coefficient

CarsalesCom  Fiserv

Poor diversification

The 3 months correlation between CarsalesCom and Fiserv is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Fiserv Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiserv 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 Fiserv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiserv Inc has no effect on the direction of CarsalesCom i.e., CarsalesCom and Fiserv go up and down completely randomly.

Pair Corralation between CarsalesCom and Fiserv

Assuming the 90 days horizon CarsalesCom is expected to under-perform the Fiserv. But the stock apears to be less risky and, when comparing its historical volatility, CarsalesCom is 1.19 times less risky than Fiserv. The stock trades about 0.0 of its potential returns per unit of risk. The Fiserv Inc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  16,224  in Fiserv Inc on September 24, 2024 and sell it today you would earn a total of  3,080  from holding Fiserv Inc or generate 18.98% return on investment over 90 days.

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

CarsalesCom  vs.  Fiserv Inc

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Fiserv Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fiserv Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fiserv reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CarsalesCom and Fiserv

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

The idea behind CarsalesCom and Fiserv 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.