Correlation Between Copart and Group 1
Can any of the company-specific risk be diversified away by investing in both Copart and Group 1 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 Group 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Copart Inc and Group 1 Automotive, you can compare the effects of market volatilities on Copart and Group 1 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 Group 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copart and Group 1.
Diversification Opportunities for Copart and Group 1
Poor diversification
The 3 months correlation between Copart and Group is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Copart Inc and Group 1 Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group 1 Automotive 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 Group 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group 1 Automotive has no effect on the direction of Copart i.e., Copart and Group 1 go up and down completely randomly.
Pair Corralation between Copart and Group 1
Given the investment horizon of 90 days Copart is expected to generate 1.22 times less return on investment than Group 1. But when comparing it to its historical volatility, Copart Inc is 1.49 times less risky than Group 1. It trades about 0.11 of its potential returns per unit of risk. Group 1 Automotive is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 18,868 in Group 1 Automotive on September 3, 2024 and sell it today you would earn a total of 23,712 from holding Group 1 Automotive or generate 125.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Copart Inc vs. Group 1 Automotive
Performance |
| Timeline |
| Copart Inc |
| Group 1 Automotive |
Copart and Group 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Copart and Group 1
The main advantage of trading using opposite Copart and Group 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copart position performs unexpectedly, Group 1 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 Group 1 will offset losses from the drop in Group 1's long position.| Copart vs. Global Payments | Copart vs. ABM Industries Incorporated | Copart vs. Thomson Reuters Corp | Copart vs. Aramark Holdings |
| Group 1 vs. Penske Automotive Group | Group 1 vs. Lithia Motors | Group 1 vs. AutoNation | Group 1 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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