Correlation Between KAR Auction and DOLFINES
Can any of the company-specific risk be diversified away by investing in both KAR Auction and DOLFINES 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 DOLFINES 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 DOLFINES SA EO, you can compare the effects of market volatilities on KAR Auction and DOLFINES 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 DOLFINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and DOLFINES.
Diversification Opportunities for KAR Auction and DOLFINES
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KAR and DOLFINES is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and DOLFINES SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLFINES SA EO 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 DOLFINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOLFINES SA EO has no effect on the direction of KAR Auction i.e., KAR Auction and DOLFINES go up and down completely randomly.
Pair Corralation between KAR Auction and DOLFINES
Assuming the 90 days horizon KAR Auction is expected to generate 19.2 times less return on investment than DOLFINES. But when comparing it to its historical volatility, KAR Auction Services is 24.35 times less risky than DOLFINES. It trades about 0.21 of its potential returns per unit of risk. DOLFINES SA EO is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 50.00 in DOLFINES SA EO on October 17, 2024 and sell it today you would earn a total of 123.00 from holding DOLFINES SA EO or generate 246.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.0% |
| Values | Daily Returns |
KAR Auction Services vs. DOLFINES SA EO
Performance |
| Timeline |
| KAR Auction Services |
| DOLFINES SA EO |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
KAR Auction and DOLFINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAR Auction and DOLFINES
The main advantage of trading using opposite KAR Auction and DOLFINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction position performs unexpectedly, DOLFINES 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 DOLFINES will offset losses from the drop in DOLFINES's long position.| KAR Auction vs. Tractor Supply | KAR Auction vs. Genuine Parts | KAR Auction vs. Best Buy Co | KAR Auction vs. Five Below |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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