Correlation Between Kaixin Auto and Vroom

Can any of the company-specific risk be diversified away by investing in both Kaixin Auto and Vroom 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 Kaixin Auto and Vroom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kaixin Auto Holdings and Vroom Inc, you can compare the effects of market volatilities on Kaixin Auto and Vroom 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 Kaixin Auto with a short position of Vroom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaixin Auto and Vroom.

Diversification Opportunities for Kaixin Auto and Vroom

0.63

Correlation Coefficient

Kaixin Auto  Vroom

Poor diversification

The 3 months correlation between Kaixin and Vroom is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Kaixin Auto Holdings and Vroom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vroom Inc and Kaixin Auto 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 Kaixin Auto Holdings are associated (or correlated) with Vroom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vroom Inc has no effect on the direction of Kaixin Auto i.e., Kaixin Auto and Vroom go up and down completely randomly.

Pair Corralation between Kaixin Auto and Vroom

Given the investment horizon of 90 days Kaixin Auto Holdings is expected to under-perform the Vroom. In addition to that, Kaixin Auto is 1.28 times more volatile than Vroom Inc. It trades about -0.17 of its total potential returns per unit of risk. Vroom Inc is currently generating about -0.14 per unit of volatility. If you would invest  947.00  in Vroom Inc on September 5, 2024 and sell it today you would lose (348.00) from holding Vroom Inc or give up 36.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Kaixin Auto Holdings  vs.  Vroom Inc

Kaixin Auto Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kaixin Auto Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Kaixin Auto displayed solid returns over the last few months and may actually be approaching a breakup point.

Vroom Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vroom Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Kaixin Auto and Vroom

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

The idea behind Kaixin Auto Holdings and Vroom Inc 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .