Correlation Between KAR Auction and LanzaTech Global

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

Diversification Opportunities for KAR Auction and LanzaTech Global

-0.39

Correlation Coefficient

KAR Auction  LanzaTech Global

Very good diversification

The 3 months correlation between KAR and LanzaTech is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and LanzaTech Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LanzaTech 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 LanzaTech Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LanzaTech Global has no effect on the direction of KAR Auction i.e., KAR Auction and LanzaTech Global go up and down completely randomly.

Pair Corralation between KAR Auction and LanzaTech Global

Considering the 90-day investment horizon KAR Auction Services is expected to generate 0.13 times more return on investment than LanzaTech Global. However, KAR Auction Services is 7.51 times less risky than LanzaTech Global. It trades about 0.08 of its potential returns per unit of risk. LanzaTech Global is currently generating about -0.02 per unit of risk. If you would invest  2,020  in KAR Auction Services on November 28, 2024 and sell it today you would earn a total of  122.00  from holding KAR Auction Services or generate 6.04% return on investment over 90 days.

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

KAR Auction Services  vs.  LanzaTech Global

KAR Auction Services

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KAR Auction Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, KAR Auction may actually be approaching a critical reversion point that can send shares even higher in March 2025.

LanzaTech Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days LanzaTech Global 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 somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with KAR Auction and LanzaTech Global

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

The idea behind KAR Auction Services and LanzaTech 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.