Correlation Between Cintas and Copart

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

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

Diversification Opportunities for Cintas and Copart

0.81

Correlation Coefficient

Cintas  Copart

Very poor diversification

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

Pair Corralation between Cintas and Copart

Given the investment horizon of 90 days Cintas is expected to generate 0.83 times more return on investment than Copart. However, Cintas is 1.21 times less risky than Copart. It trades about 0.14 of its potential returns per unit of risk. Copart Inc is currently generating about 0.11 per unit of risk. If you would invest  10,833  in Cintas on August 31, 2024 and sell it today you would earn a total of  11,746  from holding Cintas or generate 108.43% return on investment over 90 days.

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

Cintas  vs.  Copart Inc

Cintas

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cintas are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Cintas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Copart Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Copart Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Copart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cintas and Copart

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

The idea behind Cintas and Copart 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.