Correlation Between KAR Auction and Advantage Solutions
Can any of the company-specific risk be diversified away by investing in both KAR Auction and Advantage Solutions 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 KAR Auction and Advantage Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KAR Auction Services and Advantage Solutions, you can compare the effects of market volatilities on KAR Auction and Advantage Solutions 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 KAR Auction with a short position of Advantage Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and Advantage Solutions.
Diversification Opportunities for KAR Auction and Advantage Solutions
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KAR and Advantage is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and KAR Auction 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 KAR Auction Services are associated (or correlated) with Advantage Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Solutions has no effect on the direction of KAR Auction i.e., KAR Auction and Advantage Solutions go up and down completely randomly.
Pair Corralation between KAR Auction and Advantage Solutions
Considering the 90-day investment horizon KAR Auction is expected to generate 4.42 times less return on investment than Advantage Solutions. But when comparing it to its historical volatility, KAR Auction Services is 10.11 times less risky than Advantage Solutions. It trades about 0.15 of its potential returns per unit of risk. Advantage Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2.49 in Advantage Solutions on November 1, 2024 and sell it today you would lose (0.63) from holding Advantage Solutions or give up 25.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 96.3% |
| Values | Daily Returns |
KAR Auction Services vs. Advantage Solutions
Performance |
| Timeline |
| KAR Auction Services |
| Advantage Solutions |
KAR Auction and Advantage Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAR Auction and Advantage Solutions
The main advantage of trading using opposite KAR Auction and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction position performs unexpectedly, Advantage Solutions 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 Advantage Solutions will offset losses from the drop in Advantage Solutions' long position.| KAR Auction vs. CarGurus | KAR Auction vs. Kingsway Financial Services | KAR Auction vs. Driven Brands Holdings | KAR Auction vs. Group 1 Automotive |
| Advantage Solutions vs. CannBioRx Life Sciences | Advantage Solutions vs. GCM Grosvenor | Advantage Solutions vs. CuriosityStream |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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