Correlation Between KAR Auction and Cazoo
Can any of the company-specific risk be diversified away by investing in both KAR Auction and Cazoo 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 Cazoo 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 Cazoo Group, you can compare the effects of market volatilities on KAR Auction and Cazoo 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 Cazoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and Cazoo.
Diversification Opportunities for KAR Auction and Cazoo
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KAR and Cazoo is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Cazoo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cazoo Group 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 Cazoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cazoo Group has no effect on the direction of KAR Auction i.e., KAR Auction and Cazoo go up and down completely randomly.
Pair Corralation between KAR Auction and Cazoo
Considering the 90-day investment horizon KAR Auction is expected to generate 68.77 times less return on investment than Cazoo. But when comparing it to its historical volatility, KAR Auction Services is 43.15 times less risky than Cazoo. It trades about 0.05 of its potential returns per unit of risk. Cazoo Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 14,900 in Cazoo Group on August 31, 2024 and sell it today you would lose (14,899) from holding Cazoo Group or give up 99.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 75.67% |
| Values | Daily Returns |
KAR Auction Services vs. Cazoo Group
Performance |
| Timeline |
| KAR Auction Services |
| Cazoo Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
KAR Auction and Cazoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAR Auction and Cazoo
The main advantage of trading using opposite KAR Auction and Cazoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction position performs unexpectedly, Cazoo 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 Cazoo will offset losses from the drop in Cazoo's 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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