Correlation Between Copart and AutoNation
Can any of the company-specific risk be diversified away by investing in both Copart and AutoNation 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 Copart and AutoNation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Copart Inc and AutoNation, you can compare the effects of market volatilities on Copart and AutoNation 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 Copart with a short position of AutoNation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copart and AutoNation.
Diversification Opportunities for Copart and AutoNation
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Copart and AutoNation is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Copart Inc and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and Copart 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 Copart Inc are associated (or correlated) with AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Copart i.e., Copart and AutoNation go up and down completely randomly.
Pair Corralation between Copart and AutoNation
Assuming the 90 days horizon Copart Inc is expected to generate 1.38 times more return on investment than AutoNation. However, Copart is 1.38 times more volatile than AutoNation. It trades about 0.14 of its potential returns per unit of risk. AutoNation is currently generating about 0.04 per unit of risk. If you would invest 4,594 in Copart Inc on September 23, 2024 and sell it today you would earn a total of 1,011 from holding Copart Inc or generate 22.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Copart Inc vs. AutoNation
Performance |
Timeline |
Copart Inc |
AutoNation |
Copart and AutoNation Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Copart and AutoNation
The main advantage of trading using opposite Copart and AutoNation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copart position performs unexpectedly, AutoNation 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 AutoNation will offset losses from the drop in AutoNation's long position.Copart vs. Zhongsheng Group Holdings | Copart vs. CarMax Inc | Copart vs. DIeteren Group SA | Copart vs. Penske Automotive Group |
AutoNation vs. Copart Inc | AutoNation vs. Zhongsheng Group Holdings | AutoNation vs. CarMax Inc | AutoNation vs. DIeteren Group SA |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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