Correlation Between USS and Copart
Can any of the company-specific risk be diversified away by investing in both USS and Copart 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 USS and Copart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between USS Co and Copart Inc, you can compare the effects of market volatilities on USS and Copart 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 USS with a short position of Copart. Check out your portfolio center. Please also check ongoing floating volatility patterns of USS and Copart.
Diversification Opportunities for USS and Copart
Poor diversification
The 3 months correlation between USS and Copart is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding USS Co and Copart Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copart Inc and USS 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 USS Co are associated (or correlated) with Copart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copart Inc has no effect on the direction of USS i.e., USS and Copart go up and down completely randomly.
Pair Corralation between USS and Copart
Assuming the 90 days horizon USS is expected to generate 6.87 times less return on investment than Copart. But when comparing it to its historical volatility, USS Co is 3.63 times less risky than Copart. It trades about 0.02 of its potential returns per unit of risk. Copart Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,877 in Copart Inc on September 24, 2024 and sell it today you would earn a total of 2,728 from holding Copart Inc or generate 94.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
USS Co vs. Copart Inc
Performance |
| Timeline |
| USS Co |
| Copart Inc |
USS and Copart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with USS and Copart
The main advantage of trading using opposite USS and Copart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USS position performs unexpectedly, Copart 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 Copart will offset losses from the drop in Copart's long position.The idea behind USS Co and Copart Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Copart vs. Zhongsheng Group Holdings | Copart vs. CarMax Inc | Copart vs. DIeteren Group SA | Copart vs. Penske 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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