Correlation Between KAR Auction and Civeo Corp

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Can any of the company-specific risk be diversified away by investing in both KAR Auction and Civeo Corp 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 KAR Auction and Civeo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KAR Auction Services and Civeo Corp, you can compare the effects of market volatilities on KAR Auction and Civeo Corp 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 KAR Auction with a short position of Civeo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and Civeo Corp.

Diversification Opportunities for KAR Auction and Civeo Corp

-0.86
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between KAR and Civeo is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Civeo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civeo Corp and KAR Auction 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 KAR Auction Services are associated (or correlated) with Civeo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Civeo Corp has no effect on the direction of KAR Auction i.e., KAR Auction and Civeo Corp go up and down completely randomly.

Pair Corralation between KAR Auction and Civeo Corp

Considering the 90-day investment horizon KAR Auction Services is expected to generate 0.94 times more return on investment than Civeo Corp. However, KAR Auction Services is 1.06 times less risky than Civeo Corp. It trades about 0.05 of its potential returns per unit of risk. Civeo Corp is currently generating about -0.01 per unit of risk. If you would invest  1,748  in KAR Auction Services on October 9, 2024 and sell it today you would earn a total of  250.00  from holding KAR Auction Services or generate 14.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

KAR Auction Services  vs.  Civeo Corp

 Performance 
       Timeline  
KAR Auction Services 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in KAR Auction Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, KAR Auction reported solid returns over the last few months and may actually be approaching a breakup point.
Civeo Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Civeo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

KAR Auction and Civeo Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KAR Auction and Civeo Corp

The main advantage of trading using opposite KAR Auction and Civeo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction position performs unexpectedly, Civeo Corp 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 Civeo Corp will offset losses from the drop in Civeo Corp's long position.
The idea behind KAR Auction Services and Civeo Corp 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.
Check out your portfolio center.
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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