Correlation Between KAR Auction and Hudson Global

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Can any of the company-specific risk be diversified away by investing in both KAR Auction and Hudson Global 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 Hudson Global 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 Hudson Global, you can compare the effects of market volatilities on KAR Auction and Hudson Global 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 Hudson Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and Hudson Global.

Diversification Opportunities for KAR Auction and Hudson Global

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between KAR and Hudson is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Hudson Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Global 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 Hudson Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Global has no effect on the direction of KAR Auction i.e., KAR Auction and Hudson Global go up and down completely randomly.

Pair Corralation between KAR Auction and Hudson Global

Considering the 90-day investment horizon KAR Auction Services is expected to generate 0.65 times more return on investment than Hudson Global. However, KAR Auction Services is 1.53 times less risky than Hudson Global. It trades about -0.03 of its potential returns per unit of risk. Hudson Global is currently generating about -0.39 per unit of risk. If you would invest  2,052  in KAR Auction Services on October 9, 2024 and sell it today you would lose (16.00) from holding KAR Auction Services or give up 0.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

KAR Auction Services  vs.  Hudson Global

 Performance 
       Timeline  
KAR Auction Services 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in KAR Auction Services are ranked lower than 16 (%) 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.
Hudson Global 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hudson Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic 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 Hudson Global Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KAR Auction and Hudson Global

The main advantage of trading using opposite KAR Auction and Hudson Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction position performs unexpectedly, Hudson Global 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 Hudson Global will offset losses from the drop in Hudson Global's long position.
The idea behind KAR Auction Services and Hudson Global 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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