Correlation Between Kaixin Auto and Cazoo
Can any of the company-specific risk be diversified away by investing in both Kaixin Auto 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 Kaixin Auto and Cazoo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaixin Auto Holdings and Cazoo Group, you can compare the effects of market volatilities on Kaixin Auto 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 Kaixin Auto with a short position of Cazoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaixin Auto and Cazoo.
Diversification Opportunities for Kaixin Auto and Cazoo
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Kaixin and Cazoo is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Kaixin Auto Holdings and Cazoo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cazoo Group and Kaixin Auto 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 Kaixin Auto Holdings 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 Kaixin Auto i.e., Kaixin Auto and Cazoo go up and down completely randomly.
Pair Corralation between Kaixin Auto and Cazoo
Given the investment horizon of 90 days Kaixin Auto Holdings is expected to under-perform the Cazoo. But the stock apears to be less risky and, when comparing its historical volatility, Kaixin Auto Holdings is 4.76 times less risky than Cazoo. The stock trades about -0.02 of its potential returns per unit of risk. The Cazoo Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11,800 in Cazoo Group on August 28, 2024 and sell it today you would lose (11,799) 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 | 75.14% |
| Values | Daily Returns |
Kaixin Auto Holdings vs. Cazoo Group
Performance |
| Timeline |
| Kaixin Auto Holdings |
| Cazoo Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Kaixin Auto and Cazoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kaixin Auto and Cazoo
The main advantage of trading using opposite Kaixin Auto and Cazoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaixin Auto 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.| Kaixin Auto vs. Vroom Inc | Kaixin Auto vs. Cango Inc | Kaixin Auto vs. Cars Inc | Kaixin Auto vs. KAR Auction Services |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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