Correlation Between KAR Auction and Apple
Can any of the company-specific risk be diversified away by investing in both KAR Auction and Apple 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 Apple 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 Apple Inc, you can compare the effects of market volatilities on KAR Auction and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and Apple.
Diversification Opportunities for KAR Auction and Apple
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KAR and Apple is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of KAR Auction i.e., KAR Auction and Apple go up and down completely randomly.
Pair Corralation between KAR Auction and Apple
Assuming the 90 days horizon KAR Auction is expected to generate 1.26 times less return on investment than Apple. In addition to that, KAR Auction is 1.38 times more volatile than Apple Inc. It trades about 0.05 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.08 per unit of volatility. If you would invest 13,028 in Apple Inc on October 20, 2024 and sell it today you would earn a total of 9,317 from holding Apple Inc or generate 71.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KAR Auction Services vs. Apple Inc
Performance |
| Timeline |
| KAR Auction Services |
| Apple Inc |
KAR Auction and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAR Auction and Apple
The main advantage of trading using opposite KAR Auction and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| KAR Auction vs. MercadoLibre | KAR Auction vs. OReilly Automotive | KAR Auction vs. AutoZone | KAR Auction vs. Tractor Supply |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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