Correlation Between ResMed and CARSALES

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

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

Diversification Opportunities for ResMed and CARSALES

0.85

Correlation Coefficient

ResMed  CARSALES

Very poor diversification

The 3 months correlation between ResMed and CARSALES is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ResMed Inc and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM and ResMed 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 ResMed Inc are associated (or correlated) with CARSALES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of ResMed i.e., ResMed and CARSALES go up and down completely randomly.

Pair Corralation between ResMed and CARSALES

Assuming the 90 days horizon ResMed Inc is expected to generate 0.78 times more return on investment than CARSALES. However, ResMed Inc is 1.29 times less risky than CARSALES. It trades about 0.14 of its potential returns per unit of risk. CARSALESCOM is currently generating about 0.11 per unit of risk. If you would invest  20,387  in ResMed Inc on April 24, 2025 and sell it today you would earn a total of  2,283  from holding ResMed Inc or generate 11.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

ResMed Inc  vs.  CARSALESCOM

ResMed Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ResMed may actually be approaching a critical reversion point that can send shares even higher in August 2025.

CARSALESCOM

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CARSALES may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with ResMed and CARSALES

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

The idea behind ResMed Inc and CARSALESCOM 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..