Correlation Between Auto Trader and COMPUTERSHARE

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

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

Diversification Opportunities for Auto Trader and COMPUTERSHARE

0.37

Correlation Coefficient

Auto Trader  COMPUTERSHARE

Weak diversification

The 3 months correlation between Auto and COMPUTERSHARE is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and COMPUTERSHARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPUTERSHARE and Auto Trader 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 Auto Trader Group are associated (or correlated) with COMPUTERSHARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPUTERSHARE has no effect on the direction of Auto Trader i.e., Auto Trader and COMPUTERSHARE go up and down completely randomly.

Pair Corralation between Auto Trader and COMPUTERSHARE

Assuming the 90 days trading horizon Auto Trader is expected to generate 1.73 times less return on investment than COMPUTERSHARE. In addition to that, Auto Trader is 1.24 times more volatile than COMPUTERSHARE. It trades about 0.05 of its total potential returns per unit of risk. COMPUTERSHARE is currently generating about 0.1 per unit of volatility. If you would invest  2,100  in COMPUTERSHARE on April 22, 2025 and sell it today you would earn a total of  200.00  from holding COMPUTERSHARE or generate 9.52% return on investment over 90 days.

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

Auto Trader Group  vs.  COMPUTERSHARE

Auto Trader Group

Risk-Adjusted Performance

Insignificant

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

COMPUTERSHARE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COMPUTERSHARE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, COMPUTERSHARE may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Auto Trader and COMPUTERSHARE

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

The idea behind Auto Trader Group and COMPUTERSHARE 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.