Correlation Between KAR Auction and Cars
Can any of the company-specific risk be diversified away by investing in both KAR Auction and Cars 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 Cars 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 Cars Inc, you can compare the effects of market volatilities on KAR Auction and Cars 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 Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and Cars.
Diversification Opportunities for KAR Auction and Cars
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KAR and Cars is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of KAR Auction i.e., KAR Auction and Cars go up and down completely randomly.
Pair Corralation between KAR Auction and Cars
Considering the 90-day investment horizon KAR Auction Services is expected to under-perform the Cars. But the stock apears to be less risky and, when comparing its historical volatility, KAR Auction Services is 1.28 times less risky than Cars. The stock trades about -0.03 of its potential returns per unit of risk. The Cars Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,744 in Cars Inc on October 20, 2024 and sell it today you would earn a total of 20.00 from holding Cars Inc or generate 1.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KAR Auction Services vs. Cars Inc
Performance |
| Timeline |
| KAR Auction Services |
| Cars Inc |
KAR Auction and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAR Auction and Cars
The main advantage of trading using opposite KAR Auction and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| KAR Auction vs. CarGurus | KAR Auction vs. Kingsway Financial Services | KAR Auction vs. Driven Brands Holdings | KAR Auction 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
Other Complementary Tools
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |