Correlation Between Rush Enterprises and Cars
Can any of the company-specific risk be diversified away by investing in both Rush Enterprises 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 Rush Enterprises and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rush Enterprises B and Cars Inc, you can compare the effects of market volatilities on Rush Enterprises 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 Rush Enterprises with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rush Enterprises and Cars.
Diversification Opportunities for Rush Enterprises and Cars
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rush and Cars is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Rush Enterprises B and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 B 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 Rush Enterprises i.e., Rush Enterprises and Cars go up and down completely randomly.
Pair Corralation between Rush Enterprises and Cars
Assuming the 90 days horizon Rush Enterprises is expected to generate 1.0 times less return on investment than Cars. In addition to that, Rush Enterprises is 1.47 times more volatile than Cars Inc. It trades about 0.29 of its total potential returns per unit of risk. Cars Inc is currently generating about 0.42 per unit of volatility. If you would invest 1,615 in Cars Inc on August 28, 2024 and sell it today you would earn a total of 374.00 from holding Cars Inc or generate 23.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rush Enterprises B vs. Cars Inc
Performance |
| Timeline |
| Rush Enterprises B |
| Cars Inc |
Rush Enterprises and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rush Enterprises and Cars
The main advantage of trading using opposite Rush Enterprises and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rush Enterprises 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.| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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