Correlation Between KAR Auction and ManpowerGroup

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

Diversification Opportunities for KAR Auction and ManpowerGroup

0.11

Correlation Coefficient

KAR Auction  ManpowerGroup

Average diversification

The 3 months correlation between KAR and ManpowerGroup is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and ManpowerGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ManpowerGroup 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 ManpowerGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ManpowerGroup has no effect on the direction of KAR Auction i.e., KAR Auction and ManpowerGroup go up and down completely randomly.

Pair Corralation between KAR Auction and ManpowerGroup

Considering the 90-day investment horizon KAR Auction is expected to generate 1.72 times less return on investment than ManpowerGroup. In addition to that, KAR Auction is 1.02 times more volatile than ManpowerGroup. It trades about 0.02 of its total potential returns per unit of risk. ManpowerGroup is currently generating about 0.04 per unit of volatility. If you would invest  5,694  in ManpowerGroup on December 20, 2024 and sell it today you would earn a total of  213.00  from holding ManpowerGroup or generate 3.74% return on investment over 90 days.

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

KAR Auction Services  vs.  ManpowerGroup

KAR Auction Services

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KAR Auction Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, KAR Auction is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

ManpowerGroup

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ManpowerGroup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ManpowerGroup is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with KAR Auction and ManpowerGroup

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

The idea behind KAR Auction Services and ManpowerGroup 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 Global Correlations module to find global opportunities by holding instruments from different markets.