Correlation Between Carvana Co and 1stdibs

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Can any of the company-specific risk be diversified away by investing in both Carvana Co and 1stdibs 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 Carvana Co and 1stdibs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carvana Co Cl and 1stdibs, you can compare the effects of market volatilities on Carvana Co and 1stdibs 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 Carvana Co with a short position of 1stdibs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carvana Co and 1stdibs.

Diversification Opportunities for Carvana Co and 1stdibs

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Carvana and 1stdibs is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Carvana Co Cl and 1stdibs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1stdibs and Carvana Co 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 Carvana Co Cl are associated (or correlated) with 1stdibs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1stdibs has no effect on the direction of Carvana Co i.e., Carvana Co and 1stdibs go up and down completely randomly.

Pair Corralation between Carvana Co and 1stdibs

Given the investment horizon of 90 days Carvana Co Cl is expected to generate 1.01 times more return on investment than 1stdibs. However, Carvana Co is 1.01 times more volatile than 1stdibs. It trades about -0.02 of its potential returns per unit of risk. 1stdibs is currently generating about -0.05 per unit of risk. If you would invest  20,089  in Carvana Co Cl on May 14, 2022 and sell it today you would lose (15,076)  from holding Carvana Co Cl or give up 75.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy59.76%
ValuesDaily Returns

Carvana Co Cl  vs.  1stdibs

 Performance (%) 
       Timeline  
Carvana Co Cl 
Carvana Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co Cl are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Carvana Co sustained solid returns over the last few months and may actually be approaching a breakup point.

Carvana Price Channel

1stdibs 
1stdibs Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in 1stdibs are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, 1stdibs reported solid returns over the last few months and may actually be approaching a breakup point.

1stdibs Price Channel

Carvana Co and 1stdibs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carvana Co and 1stdibs

The main advantage of trading using opposite Carvana Co and 1stdibs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carvana Co position performs unexpectedly, 1stdibs 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 1stdibs will offset losses from the drop in 1stdibs' long position.
The idea behind Carvana Co Cl and 1stdibs 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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