Correlation Between Kar Auction and Best Buy

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Can any of the company-specific risk be diversified away by investing in both Kar Auction and Best Buy 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 Best Buy 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 Best Buy Company, you can compare the effects of market volatilities on Kar Auction and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kar Auction and Best Buy.

Diversification Opportunities for Kar Auction and Best Buy

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Kar Auction and Best Buy is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Kar Auction Services and Best Buy Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Kar Auction i.e., Kar Auction and Best Buy go up and down completely randomly.

Pair Corralation between Kar Auction and Best Buy

Considering the 90-day investment horizon Kar Auction Services is expected to generate 1.38 times more return on investment than Best Buy. However, Kar Auction is 1.38 times more volatile than Best Buy Company. It trades about 0.0 of its potential returns per unit of risk. Best Buy Company is currently generating about -0.03 per unit of risk. If you would invest  1,619  in Kar Auction Services on June 29, 2022 and sell it today you would lose (438.00)  from holding Kar Auction Services or give up 27.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Kar Auction Services  vs.  Best Buy Company

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

Kar Auction Price Channel

Best Buy 
Best Buy Performance
0 of 100
Over the last 90 days Best Buy Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Best Buy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Best Buy Price Channel

Kar Auction and Best Buy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kar Auction and Best Buy

The main advantage of trading using opposite Kar Auction and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kar Auction position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.
Kar Auction vs. Clearwater Paper Corp
The idea behind Kar Auction Services and Best Buy Company 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.
Best Buy vs. Clearwater Paper Corp
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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