Correlation Between OReilly Automotive and Kaixin Auto

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

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

Diversification Opportunities for OReilly Automotive and Kaixin Auto

-0.38

Correlation Coefficient

OReilly Automotive  Kaixin Auto

Very good diversification

The 3 months correlation between OReilly and Kaixin is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding OReilly Automotive and Kaixin Auto Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaixin Auto Holdings and OReilly Automotive 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 OReilly Automotive are associated (or correlated) with Kaixin Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaixin Auto Holdings has no effect on the direction of OReilly Automotive i.e., OReilly Automotive and Kaixin Auto go up and down completely randomly.

Pair Corralation between OReilly Automotive and Kaixin Auto

Given the investment horizon of 90 days OReilly Automotive is expected to generate 8.09 times less return on investment than Kaixin Auto. But when comparing it to its historical volatility, OReilly Automotive is 25.77 times less risky than Kaixin Auto. It trades about 0.16 of its potential returns per unit of risk. Kaixin Auto Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  414.00  in Kaixin Auto Holdings on September 15, 2024 and sell it today you would lose (238.00) from holding Kaixin Auto Holdings or give up 57.49% of portfolio value over 90 days.

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

OReilly Automotive  vs.  Kaixin Auto Holdings

OReilly Automotive

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, OReilly Automotive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with OReilly Automotive and Kaixin Auto

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

The idea behind OReilly Automotive and Kaixin Auto 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 CEOs Directory module to screen CEOs from public companies around the world.