Correlation Between Carvana and Vroom
Can any of the company-specific risk be diversified away by investing in both Carvana and Vroom 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 Vroom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carvana Co and Vroom Inc, you can compare the effects of market volatilities on Carvana and Vroom 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 Vroom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carvana and Vroom.
Diversification Opportunities for Carvana and Vroom
Modest diversification
The 3 months correlation between Carvana and Vroom is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Carvana Co and Vroom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vroom Inc 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 Vroom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vroom Inc has no effect on the direction of Carvana i.e., Carvana and Vroom go up and down completely randomly.
Pair Corralation between Carvana and Vroom
Given the investment horizon of 90 days Carvana Co is expected to generate 0.46 times more return on investment than Vroom. However, Carvana Co is 2.16 times less risky than Vroom. It trades about 0.48 of its potential returns per unit of risk. Vroom Inc is currently generating about 0.01 per unit of risk. If you would invest 19,835 in Carvana Co on November 8, 2024 and sell it today you would earn a total of 6,482 from holding Carvana Co or generate 32.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carvana Co vs. Vroom Inc
Performance |
| Timeline |
| Carvana |
| Vroom Inc |
Carvana and Vroom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carvana and Vroom
The main advantage of trading using opposite Carvana and Vroom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carvana position performs unexpectedly, Vroom 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 Vroom will offset losses from the drop in Vroom's long position.| Carvana vs. CarMax Inc | Carvana vs. U Power Limited | Carvana vs. SunCar Technology Group | Carvana vs. Jiuzi Holdings |
| Vroom vs. CarMax Inc | Vroom vs. SunCar Technology Group | Vroom vs. U Power Limited | Vroom vs. Camping World Holdings |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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