Correlation Between NET Power and CarsalesCom

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

By analyzing existing cross correlation between NET Power and CarsalesCom Ltd ADR, you can compare the effects of market volatilities on NET Power and CarsalesCom 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 NET Power with a short position of CarsalesCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of NET Power and CarsalesCom.

Diversification Opportunities for NET Power and CarsalesCom

0.32

Correlation Coefficient

NET Power  CarsalesCom

Weak diversification

The 3 months correlation between NET and CarsalesCom is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding NET Power and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR and NET Power 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 NET Power are associated (or correlated) with CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of NET Power i.e., NET Power and CarsalesCom go up and down completely randomly.

Pair Corralation between NET Power and CarsalesCom

Given the investment horizon of 90 days NET Power is expected to generate 2.72 times more return on investment than CarsalesCom. However, NET Power is 2.72 times more volatile than CarsalesCom Ltd ADR. It trades about 0.1 of its potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.08 per unit of risk. If you would invest  168.00  in NET Power on May 19, 2025 and sell it today you would earn a total of  70.00  from holding NET Power or generate 41.67% return on investment over 90 days.

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

NET Power  vs.  CarsalesCom Ltd ADR

NET Power

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in NET Power are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, NET Power reported solid returns over the last few months and may actually be approaching a breakup point.

CarsalesCom ADR

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CarsalesCom showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NET Power and CarsalesCom

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

The idea behind NET Power and CarsalesCom Ltd ADR 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..