Correlation Between Mister Car and American International

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

By analyzing existing cross correlation between Mister Car Wash and American International Holdings, you can compare the effects of market volatilities on Mister Car and American International 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 Mister Car with a short position of American International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mister Car and American International.

Diversification Opportunities for Mister Car and American International

0.07

Correlation Coefficient

Mister Car  American International

Significant diversification

The 3 months correlation between Mister and American is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Mister Car Wash and American International Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International and Mister Car 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 Mister Car Wash are associated (or correlated) with American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of Mister Car i.e., Mister Car and American International go up and down completely randomly.

Pair Corralation between Mister Car and American International

Considering the 90-day investment horizon Mister Car is expected to generate 68.65 times less return on investment than American International. But when comparing it to its historical volatility, Mister Car Wash is 69.96 times less risky than American International. It trades about 0.16 of its potential returns per unit of risk. American International Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.01  in American International Holdings on September 2, 2024 and sell it today you would earn a total of  0.00  from holding American International Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Mister Car Wash  vs.  American International Holding

Mister Car Wash

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mister Car Wash are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Mister Car showed solid returns over the last few months and may actually be approaching a breakup point.

American International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American International Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward indicators, American International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mister Car and American International

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

The idea behind Mister Car Wash and American International Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.