Correlation Between Rush Enterprises and KAR Auction
Can any of the company-specific risk be diversified away by investing in both Rush Enterprises and KAR Auction 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 Rush Enterprises and KAR Auction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rush Enterprises A and KAR Auction Services, you can compare the effects of market volatilities on Rush Enterprises and KAR Auction 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 Rush Enterprises with a short position of KAR Auction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rush Enterprises and KAR Auction.
Diversification Opportunities for Rush Enterprises and KAR Auction
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rush and KAR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Rush Enterprises A and KAR Auction Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAR Auction Services and Rush Enterprises 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 Rush Enterprises A are associated (or correlated) with KAR Auction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAR Auction Services has no effect on the direction of Rush Enterprises i.e., Rush Enterprises and KAR Auction go up and down completely randomly.
Pair Corralation between Rush Enterprises and KAR Auction
Assuming the 90 days horizon Rush Enterprises is expected to generate 1.56 times less return on investment than KAR Auction. But when comparing it to its historical volatility, Rush Enterprises A is 1.06 times less risky than KAR Auction. It trades about 0.23 of its potential returns per unit of risk. KAR Auction Services is currently generating about 0.33 of returns per unit of risk over similar time horizon. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rush Enterprises A vs. KAR Auction Services
Performance |
| Timeline |
| Rush Enterprises A |
| KAR Auction Services |
Rush Enterprises and KAR Auction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rush Enterprises and KAR Auction
The main advantage of trading using opposite Rush Enterprises and KAR Auction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rush Enterprises position performs unexpectedly, KAR Auction 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 KAR Auction will offset losses from the drop in KAR Auction's long position.| Rush Enterprises vs. Kingsway Financial Services | Rush Enterprises vs. Group 1 Automotive | Rush Enterprises vs. KAR Auction Services | Rush Enterprises vs. Cars Inc |
| KAR Auction vs. Bassett Furniture Industries | KAR Auction vs. Hooker Furniture | KAR Auction vs. Natuzzi SpA | KAR Auction vs. Flexsteel Industries |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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