Correlation Between KAR Auction and Rush Enterprises
Can any of the company-specific risk be diversified away by investing in both KAR Auction and Rush Enterprises 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 Rush Enterprises 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 Rush Enterprises B, you can compare the effects of market volatilities on KAR Auction and Rush Enterprises 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 Rush Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and Rush Enterprises.
Diversification Opportunities for KAR Auction and Rush Enterprises
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KAR and Rush is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Rush Enterprises B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rush Enterprises B 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 Rush Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rush Enterprises B has no effect on the direction of KAR Auction i.e., KAR Auction and Rush Enterprises go up and down completely randomly.
Pair Corralation between KAR Auction and Rush Enterprises
Considering the 90-day investment horizon KAR Auction Services is expected to generate 0.88 times more return on investment than Rush Enterprises. However, KAR Auction Services is 1.14 times less risky than Rush Enterprises. It trades about 0.33 of its potential returns per unit of risk. Rush Enterprises B is currently generating about 0.29 per unit of risk. If you would invest 1,641 in KAR Auction Services on August 28, 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. Rush Enterprises B
Performance |
| Timeline |
| KAR Auction Services |
| Rush Enterprises B |
KAR Auction and Rush Enterprises Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAR Auction and Rush Enterprises
The main advantage of trading using opposite KAR Auction and Rush Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction position performs unexpectedly, Rush Enterprises 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 Rush Enterprises will offset losses from the drop in Rush Enterprises' long position.| KAR Auction vs. Bassett Furniture Industries | KAR Auction vs. Hooker Furniture | KAR Auction vs. Natuzzi SpA | KAR Auction vs. Flexsteel Industries |
| Rush Enterprises vs. Sonic Automotive | Rush Enterprises vs. KAR Auction Services | Rush Enterprises vs. Kingsway Financial Services | Rush Enterprises vs. Asbury Automotive 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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