Correlation Between Carvana Co and Vertex Energy

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Can any of the company-specific risk be diversified away by investing in both Carvana Co and Vertex Energy 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 Carvana Co and Vertex Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carvana Co Cl and Vertex Energy, you can compare the effects of market volatilities on Carvana Co and Vertex Energy 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 Carvana Co with a short position of Vertex Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carvana Co and Vertex Energy.

Diversification Opportunities for Carvana Co and Vertex Energy

0.01
  Correlation Coefficient

Significant diversification

The 3 months correlation between Carvana and Vertex is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Carvana Co Cl and Vertex Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Energy and Carvana Co 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 Carvana Co Cl are associated (or correlated) with Vertex Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex Energy has no effect on the direction of Carvana Co i.e., Carvana Co and Vertex Energy go up and down completely randomly.

Pair Corralation between Carvana Co and Vertex Energy

Given the investment horizon of 90 days Carvana Co Cl is expected to generate 0.98 times more return on investment than Vertex Energy. However, Carvana Co Cl is 1.02 times less risky than Vertex Energy. It trades about 0.36 of its potential returns per unit of risk. Vertex Energy is currently generating about -0.06 per unit of risk. If you would invest  2,209  in Carvana Co Cl on May 12, 2022 and sell it today you would earn a total of  2,522  from holding Carvana Co Cl or generate 114.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Carvana Co Cl  vs.  Vertex Energy

 Performance (%) 
       Timeline  
Carvana Co Cl 
Carvana Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co Cl are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Carvana Co sustained solid returns over the last few months and may actually be approaching a breakup point.

Carvana Price Channel

Vertex Energy 
Vertex Performance
0 of 100
Over the last 90 days Vertex Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in September 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Vertex Price Channel

Carvana Co and Vertex Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carvana Co and Vertex Energy

The main advantage of trading using opposite Carvana Co and Vertex Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carvana Co position performs unexpectedly, Vertex Energy 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 Vertex Energy will offset losses from the drop in Vertex Energy's long position.
The idea behind Carvana Co Cl and Vertex Energy 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.

Vertex Energy

Pair trading matchups for Vertex Energy

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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