Correlation Between Valvoline and CarGurus
Can any of the company-specific risk be diversified away by investing in both Valvoline and CarGurus 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 Valvoline and CarGurus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valvoline and CarGurus, you can compare the effects of market volatilities on Valvoline and CarGurus 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 Valvoline with a short position of CarGurus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valvoline and CarGurus.
Diversification Opportunities for Valvoline and CarGurus
Very good diversification
The 3 months correlation between Valvoline and CarGurus is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Valvoline and CarGurus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarGurus and Valvoline 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 Valvoline are associated (or correlated) with CarGurus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarGurus has no effect on the direction of Valvoline i.e., Valvoline and CarGurus go up and down completely randomly.
Pair Corralation between Valvoline and CarGurus
Considering the 90-day investment horizon Valvoline is expected to under-perform the CarGurus. But the stock apears to be less risky and, when comparing its historical volatility, Valvoline is 1.65 times less risky than CarGurus. The stock trades about -0.03 of its potential returns per unit of risk. The CarGurus is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,898 in CarGurus on July 1, 2024 and sell it today you would earn a total of 71.00 from holding CarGurus or generate 2.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Valvoline vs. CarGurus
Performance |
Timeline |
Valvoline |
CarGurus |
Valvoline and CarGurus Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Valvoline and CarGurus
The main advantage of trading using opposite Valvoline and CarGurus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valvoline position performs unexpectedly, CarGurus 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 CarGurus will offset losses from the drop in CarGurus' long position.Valvoline vs. Cosan SA ADR | Valvoline vs. Delek Energy | Valvoline vs. Crossamerica Partners LP | Valvoline vs. Par Pacific Holdings |
CarGurus vs. KAR Auction Services | CarGurus vs. Kingsway Financial Services | CarGurus vs. Driven Brands Holdings | CarGurus vs. Group 1 Automotive |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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