Correlation Between KAR Auction and Barrett Business
Can any of the company-specific risk be diversified away by investing in both KAR Auction and Barrett Business 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 Barrett Business 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 Barrett Business Services, you can compare the effects of market volatilities on KAR Auction and Barrett Business 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 Barrett Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and Barrett Business.
Diversification Opportunities for KAR Auction and Barrett Business
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KAR and Barrett is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Barrett Business Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrett Business Services 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 Barrett Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrett Business Services has no effect on the direction of KAR Auction i.e., KAR Auction and Barrett Business go up and down completely randomly.
Pair Corralation between KAR Auction and Barrett Business
Considering the 90-day investment horizon KAR Auction Services is expected to generate 1.49 times more return on investment than Barrett Business. However, KAR Auction is 1.49 times more volatile than Barrett Business Services. It trades about 0.33 of its potential returns per unit of risk. Barrett Business Services is currently generating about 0.36 per unit of risk. If you would invest 1,641 in KAR Auction Services on August 27, 2024 and sell it today you would earn a total of 379.00 from holding KAR Auction Services or generate 23.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
KAR Auction Services vs. Barrett Business Services
Performance |
| Timeline |
| KAR Auction Services |
| Barrett Business Services |
KAR Auction and Barrett Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAR Auction and Barrett Business
The main advantage of trading using opposite KAR Auction and Barrett Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction position performs unexpectedly, Barrett Business 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 Barrett Business will offset losses from the drop in Barrett Business' long position.| KAR Auction vs. Bassett Furniture Industries | KAR Auction vs. Hooker Furniture | KAR Auction vs. Natuzzi SpA | KAR Auction vs. Flexsteel Industries |
| Barrett Business vs. ExlService Holdings | Barrett Business vs. WNS Holdings | Barrett Business vs. Gartner | Barrett Business vs. The Hackett 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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