Correlation Between ACV Auctions and Cars

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

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

Diversification Opportunities for ACV Auctions and Cars

0.95

Correlation Coefficient

ACV Auctions  Cars

Almost no diversification

The 3 months correlation between ACV and Cars is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding ACV Auctions and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and ACV Auctions 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 ACV Auctions are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of ACV Auctions i.e., ACV Auctions and Cars go up and down completely randomly.

Pair Corralation between ACV Auctions and Cars

Given the investment horizon of 90 days ACV Auctions is expected to under-perform the Cars. But the stock apears to be less risky and, when comparing its historical volatility, ACV Auctions is 1.18 times less risky than Cars. The stock trades about -0.16 of its potential returns per unit of risk. The Cars Inc is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,736  in Cars Inc on December 27, 2024 and sell it today you would lose (512.00) from holding Cars Inc or give up 29.49% of portfolio value over 90 days.

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

ACV Auctions  vs.  Cars Inc

ACV Auctions

Risk-Adjusted Performance

Very Weak

Over the last 90 days ACV Auctions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cars Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ACV Auctions and Cars

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

The idea behind ACV Auctions and Cars 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.