Correlation Between CarsalesCom and New Hope

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

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

Diversification Opportunities for CarsalesCom and New Hope

-0.23

Correlation Coefficient

CarsalesCom  New Hope

Very good diversification

The 3 months correlation between CarsalesCom and New is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope 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 New Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope has no effect on the direction of CarsalesCom i.e., CarsalesCom and New Hope go up and down completely randomly.

Pair Corralation between CarsalesCom and New Hope

Assuming the 90 days horizon CarsalesCom is expected to under-perform the New Hope. But the stock apears to be less risky and, when comparing its historical volatility, CarsalesCom is 1.22 times less risky than New Hope. The stock trades about -0.33 of its potential returns per unit of risk. The New Hope is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  288.00  in New Hope on September 22, 2024 and sell it today you would earn a total of  3.00  from holding New Hope or generate 1.04% return on investment over 90 days.

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

CarsalesCom  vs.  New Hope

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

New Hope

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Hope are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, New Hope may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CarsalesCom and New Hope

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

The idea behind CarsalesCom and New Hope 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.