Correlation Between Inchcape Plc and Copart

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

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

Diversification Opportunities for Inchcape Plc and Copart

0.19

Correlation Coefficient

Inchcape Plc  Copart

Average diversification

The 3 months correlation between Inchcape and Copart is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Inchcape plc and Copart Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copart Inc and Inchcape Plc 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 Inchcape plc 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 Inchcape Plc i.e., Inchcape Plc and Copart go up and down completely randomly.

Pair Corralation between Inchcape Plc and Copart

Assuming the 90 days trading horizon Inchcape plc is expected to generate 0.77 times more return on investment than Copart. However, Inchcape plc is 1.29 times less risky than Copart. It trades about 0.18 of its potential returns per unit of risk. Copart Inc is currently generating about -0.18 per unit of risk. If you would invest  904.00  in Inchcape plc on September 23, 2024 and sell it today you would earn a total of  35.00  from holding Inchcape plc or generate 3.87% return on investment over 90 days.

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

Inchcape plc  vs.  Copart Inc

Inchcape plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inchcape plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Inchcape Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite nearly fragile basic indicators, Copart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inchcape Plc and Copart

The main advantage of trading using opposite Inchcape Plc and Copart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inchcape Plc 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 Inchcape plc 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.