Correlation Between ABM Industries and KAR Auction
Can any of the company-specific risk be diversified away by investing in both ABM Industries and KAR Auction 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 ABM Industries and KAR Auction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABM Industries Incorporated and KAR Auction Services, you can compare the effects of market volatilities on ABM Industries and KAR Auction 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 ABM Industries with a short position of KAR Auction. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABM Industries and KAR Auction.
Diversification Opportunities for ABM Industries and KAR Auction
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ABM and KAR is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ABM Industries Incorporated and KAR Auction Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAR Auction Services and ABM Industries 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 ABM Industries Incorporated are associated (or correlated) with KAR Auction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAR Auction Services has no effect on the direction of ABM Industries i.e., ABM Industries and KAR Auction go up and down completely randomly.
Pair Corralation between ABM Industries and KAR Auction
Considering the 90-day investment horizon ABM Industries is expected to generate 3.4 times less return on investment than KAR Auction. But when comparing it to its historical volatility, ABM Industries Incorporated is 2.02 times less risky than KAR Auction. It trades about 0.21 of its potential returns per unit of risk. KAR Auction Services is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,620 in KAR Auction Services on September 4, 2024 and sell it today you would earn a total of 388.00 from holding KAR Auction Services or generate 23.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABM Industries Incorporated vs. KAR Auction Services
Performance |
| Timeline |
| ABM Industries |
| KAR Auction Services |
ABM Industries and KAR Auction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABM Industries and KAR Auction
The main advantage of trading using opposite ABM Industries and KAR Auction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABM Industries position performs unexpectedly, KAR Auction 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 KAR Auction will offset losses from the drop in KAR Auction's long position.| ABM Industries vs. Cass Information Systems | ABM Industries vs. First Advantage Corp | ABM Industries vs. Rentokil Initial PLC | ABM Industries vs. CBIZ Inc |
| KAR Auction vs. CarGurus | KAR Auction vs. Kingsway Financial Services | KAR Auction vs. Driven Brands Holdings | KAR Auction vs. Group 1 Automotive |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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