Correlation Between Carvana and Kingsway Financial
Can any of the company-specific risk be diversified away by investing in both Carvana and Kingsway Financial 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 and Kingsway Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carvana Co and Kingsway Financial Services, you can compare the effects of market volatilities on Carvana and Kingsway Financial 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 with a short position of Kingsway Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carvana and Kingsway Financial.
Diversification Opportunities for Carvana and Kingsway Financial
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Carvana and Kingsway is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Carvana Co and Kingsway Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsway Financial and Carvana 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 are associated (or correlated) with Kingsway Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsway Financial has no effect on the direction of Carvana i.e., Carvana and Kingsway Financial go up and down completely randomly.
Pair Corralation between Carvana and Kingsway Financial
Given the investment horizon of 90 days Carvana Co is expected to generate 2.28 times more return on investment than Kingsway Financial. However, Carvana is 2.28 times more volatile than Kingsway Financial Services. It trades about 0.26 of its potential returns per unit of risk. Kingsway Financial Services is currently generating about -0.06 per unit of risk. If you would invest 20,502 in Carvana Co on August 27, 2024 and sell it today you would earn a total of 5,578 from holding Carvana Co or generate 27.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carvana Co vs. Kingsway Financial Services
Performance |
| Timeline |
| Carvana |
| Kingsway Financial |
Carvana and Kingsway Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carvana and Kingsway Financial
The main advantage of trading using opposite Carvana and Kingsway Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carvana position performs unexpectedly, Kingsway Financial 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 Kingsway Financial will offset losses from the drop in Kingsway Financial's long position.| Carvana vs. CarMax Inc | Carvana vs. U Power Limited | Carvana vs. SunCar Technology Group | Carvana vs. Jiuzi Holdings |
| Kingsway Financial vs. CarGurus | Kingsway Financial vs. KAR Auction Services | Kingsway Financial vs. Driven Brands Holdings | Kingsway Financial 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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