Correlation Between KAR Auction and JX Luxventure

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

Diversification Opportunities for KAR Auction and JX Luxventure

-0.82

Correlation Coefficient

KAR Auction  JX Luxventure

Pay attention - limited upside

The 3 months correlation between KAR and JXG is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and JX Luxventure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JX Luxventure Limited 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 JX Luxventure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JX Luxventure Limited has no effect on the direction of KAR Auction i.e., KAR Auction and JX Luxventure go up and down completely randomly.

Pair Corralation between KAR Auction and JX Luxventure

Considering the 90-day investment horizon KAR Auction Services is expected to under-perform the JX Luxventure. But the stock apears to be less risky and, when comparing its historical volatility, KAR Auction Services is 6.89 times less risky than JX Luxventure. The stock trades about -0.12 of its potential returns per unit of risk. The JX Luxventure Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  113.00  in JX Luxventure Limited on October 8, 2024 and sell it today you would lose (7.00) from holding JX Luxventure Limited or give up 6.19% of portfolio value over 90 days.

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

KAR Auction Services  vs.  JX Luxventure Limited

KAR Auction Services

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KAR Auction Services are ranked lower than 15 (%) 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.

JX Luxventure Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JX Luxventure Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KAR Auction and JX Luxventure

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

The idea behind KAR Auction Services and JX Luxventure Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.