Correlation Between Copart and Global Payments

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

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

Diversification Opportunities for Copart and Global Payments

0.81

Correlation Coefficient

Copart  Global Payments

Very poor diversification

The 3 months correlation between Copart and Global is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Copart Inc and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments and Copart 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 Copart Inc are associated (or correlated) with Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of Copart i.e., Copart and Global Payments go up and down completely randomly.

Pair Corralation between Copart and Global Payments

Given the investment horizon of 90 days Copart Inc is expected to generate 0.69 times more return on investment than Global Payments. However, Copart Inc is 1.45 times less risky than Global Payments. It trades about -0.06 of its potential returns per unit of risk. Global Payments is currently generating about -0.1 per unit of risk. If you would invest  5,813  in Copart Inc on December 28, 2024 and sell it today you would lose (249.00) from holding Copart Inc or give up 4.28% of portfolio value over 90 days.

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

Copart Inc  vs.  Global Payments

Copart Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Copart Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Copart is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Global Payments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Payments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Copart and Global Payments

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

The idea behind Copart Inc and Global Payments 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 Transaction History module to view history of all your transactions and understand their impact on performance.