Correlation Between Carriage Services and Mister Car

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

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

Diversification Opportunities for Carriage Services and Mister Car

-0.12

Correlation Coefficient

Carriage Services  Mister Car

Good diversification

The 3 months correlation between Carriage and Mister is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Carriage Services and Mister Car Wash, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mister Car Wash, and Carriage Services 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 Carriage Services are associated (or correlated) with Mister Car. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mister Car Wash, has no effect on the direction of Carriage Services i.e., Carriage Services and Mister Car go up and down completely randomly.

Pair Corralation between Carriage Services and Mister Car

Considering the 90-day investment horizon Carriage Services is expected to under-perform the Mister Car. But the stock apears to be less risky and, when comparing its historical volatility, Carriage Services is 1.63 times less risky than Mister Car. The stock trades about -0.02 of its potential returns per unit of risk. The Mister Car Wash, is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  719.00  in Mister Car Wash, on December 29, 2024 and sell it today you would earn a total of  72.00  from holding Mister Car Wash, or generate 10.01% return on investment over 90 days.

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

Carriage Services  vs.  Mister Car Wash,

Carriage Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carriage Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Carriage Services is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mister Car Wash,

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mister Car Wash, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Mister Car may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Carriage Services and Mister Car

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

The idea behind Carriage Services and Mister Car Wash, 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.