Correlation Between KAR Auction and ASPEN TECHINC
Can any of the company-specific risk be diversified away by investing in both KAR Auction and ASPEN TECHINC 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 ASPEN TECHINC 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 ASPEN TECHINC DL, you can compare the effects of market volatilities on KAR Auction and ASPEN TECHINC 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 ASPEN TECHINC. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and ASPEN TECHINC.
Diversification Opportunities for KAR Auction and ASPEN TECHINC
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KAR and ASPEN is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and ASPEN TECHINC DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASPEN TECHINC DL 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 ASPEN TECHINC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASPEN TECHINC DL has no effect on the direction of KAR Auction i.e., KAR Auction and ASPEN TECHINC go up and down completely randomly.
Pair Corralation between KAR Auction and ASPEN TECHINC
Assuming the 90 days horizon KAR Auction Services is expected to generate 1.4 times more return on investment than ASPEN TECHINC. However, KAR Auction is 1.4 times more volatile than ASPEN TECHINC DL. It trades about 0.13 of its potential returns per unit of risk. ASPEN TECHINC DL is currently generating about 0.14 per unit of risk. If you would invest 1,550 in KAR Auction Services on November 2, 2024 and sell it today you would earn a total of 420.00 from holding KAR Auction Services or generate 27.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.04% |
| Values | Daily Returns |
KAR Auction Services vs. ASPEN TECHINC DL
Performance |
| Timeline |
| KAR Auction Services |
| ASPEN TECHINC DL |
KAR Auction and ASPEN TECHINC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAR Auction and ASPEN TECHINC
The main advantage of trading using opposite KAR Auction and ASPEN TECHINC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction position performs unexpectedly, ASPEN TECHINC 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 ASPEN TECHINC will offset losses from the drop in ASPEN TECHINC's long position.| KAR Auction vs. Chiba Bank | KAR Auction vs. Warner Music Group | KAR Auction vs. Canadian Utilities Limited | KAR Auction vs. Direct Line Insurance |
| ASPEN TECHINC vs. KOBE STEEL LTD | ASPEN TECHINC vs. Mount Gibson Iron | ASPEN TECHINC vs. Strategic Education | ASPEN TECHINC vs. TAL Education 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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