Correlation Between KAR Auction and SunCar Technology

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

Diversification Opportunities for KAR Auction and SunCar Technology

-0.34

Correlation Coefficient

KAR Auction  SunCar Technology

Very good diversification

The 3 months correlation between KAR and SunCar is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and SunCar Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunCar Technology 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 SunCar Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunCar Technology has no effect on the direction of KAR Auction i.e., KAR Auction and SunCar Technology go up and down completely randomly.

Pair Corralation between KAR Auction and SunCar Technology

Considering the 90-day investment horizon KAR Auction Services is expected to generate 0.49 times more return on investment than SunCar Technology. However, KAR Auction Services is 2.04 times less risky than SunCar Technology. It trades about 0.17 of its potential returns per unit of risk. SunCar Technology Group is currently generating about 0.0 per unit of risk. If you would invest  1,645  in KAR Auction Services on September 16, 2024 and sell it today you would earn a total of  412.00  from holding KAR Auction Services or generate 25.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

KAR Auction Services  vs.  SunCar Technology Group

KAR Auction Services

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KAR Auction Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, KAR Auction reported solid returns over the last few months and may actually be approaching a breakup point.

SunCar Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SunCar Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, SunCar Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KAR Auction and SunCar Technology

The main advantage of trading using opposite KAR Auction and SunCar Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction position performs unexpectedly, SunCar Technology 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 SunCar Technology will offset losses from the drop in SunCar Technology's long position.

The idea behind KAR Auction Services and SunCar Technology Group 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.