Correlation Between Copart and Cars
Can any of the company-specific risk be diversified away by investing in both Copart and Cars 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 Copart and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Copart Inc and Cars Inc, you can compare the effects of market volatilities on Copart and Cars 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 Copart with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copart and Cars.
Diversification Opportunities for Copart and Cars
Very poor diversification
The 3 months correlation between Copart and Cars is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Copart Inc and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and Copart 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 Copart Inc are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Copart i.e., Copart and Cars go up and down completely randomly.
Pair Corralation between Copart and Cars
Assuming the 90 days horizon Copart Inc is expected to under-perform the Cars. But the stock apears to be less risky and, when comparing its historical volatility, Copart Inc is 1.81 times less risky than Cars. The stock trades about -0.02 of its potential returns per unit of risk. The Cars Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,660 in Cars Inc on November 1, 2024 and sell it today you would earn a total of 60.00 from holding Cars Inc or generate 3.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Copart Inc vs. Cars Inc
Performance |
| Timeline |
| Copart Inc |
| Cars Inc |
Copart and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Copart and Cars
The main advantage of trading using opposite Copart and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copart position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| Copart vs. Zhongsheng Group Holdings | Copart vs. Penske Automotive Group | Copart vs. Lithia Motors | Copart vs. Asbury Automotive Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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