Correlation Between Rush Enterprises and ACV Auctions

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

By analyzing existing cross correlation between Rush Enterprises B and ACV Auctions, you can compare the effects of market volatilities on Rush Enterprises and ACV Auctions 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 Rush Enterprises with a short position of ACV Auctions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rush Enterprises and ACV Auctions.

Diversification Opportunities for Rush Enterprises and ACV Auctions

0.69

Correlation Coefficient

Rush Enterprises  ACV Auctions

Poor diversification

The 3 months correlation between Rush and ACV is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Rush Enterprises B and ACV Auctions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACV Auctions and Rush Enterprises 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 Rush Enterprises B are associated (or correlated) with ACV Auctions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACV Auctions has no effect on the direction of Rush Enterprises i.e., Rush Enterprises and ACV Auctions go up and down completely randomly.

Pair Corralation between Rush Enterprises and ACV Auctions

Assuming the 90 days horizon Rush Enterprises B is expected to generate 1.07 times more return on investment than ACV Auctions. However, Rush Enterprises is 1.07 times more volatile than ACV Auctions. It trades about 0.11 of its potential returns per unit of risk. ACV Auctions is currently generating about 0.04 per unit of risk. If you would invest  4,735  in Rush Enterprises B on September 15, 2024 and sell it today you would earn a total of  816.00  from holding Rush Enterprises B or generate 17.23% return on investment over 90 days.

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

Rush Enterprises B  vs.  ACV Auctions

Rush Enterprises B

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rush Enterprises B are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical indicators, Rush Enterprises sustained solid returns over the last few months and may actually be approaching a breakup point.

ACV Auctions

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ACV Auctions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, ACV Auctions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rush Enterprises and ACV Auctions

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

The idea behind Rush Enterprises B and ACV Auctions 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.