Correlation Between Global Payments and Copart

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

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

Diversification Opportunities for Global Payments and Copart

0.81

Correlation Coefficient

Global Payments  Copart

Very poor diversification

The 3 months correlation between Global and Copart is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Global Payments and Copart Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copart Inc and Global Payments 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 Global Payments 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 Global Payments i.e., Global Payments and Copart go up and down completely randomly.

Pair Corralation between Global Payments and Copart

Considering the 90-day investment horizon Global Payments is expected to under-perform the Copart. In addition to that, Global Payments is 1.45 times more volatile than Copart Inc. It trades about -0.11 of its total potential returns per unit of risk. Copart Inc is currently generating about -0.06 per unit of volatility. 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	98.36%
Values	Daily Returns

Global Payments  vs.  Copart Inc

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.

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.

Pair Trading with Global Payments and Copart

The main advantage of trading using opposite Global Payments and Copart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Payments 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 Global Payments 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.