Correlation Between KAR Auction and Insperity

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

Diversification Opportunities for KAR Auction and Insperity

0.55

Correlation Coefficient

KAR Auction  Insperity

Very weak diversification

The 3 months correlation between KAR and Insperity is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Insperity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insperity 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 Insperity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insperity has no effect on the direction of KAR Auction i.e., KAR Auction and Insperity go up and down completely randomly.

Pair Corralation between KAR Auction and Insperity

Considering the 90-day investment horizon KAR Auction is expected to generate 15.21 times less return on investment than Insperity. But when comparing it to its historical volatility, KAR Auction Services is 1.71 times less risky than Insperity. It trades about 0.01 of its potential returns per unit of risk. Insperity is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,609  in Insperity on December 19, 2024 and sell it today you would earn a total of  1,426  from holding Insperity or generate 18.74% return on investment over 90 days.

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

KAR Auction Services  vs.  Insperity

KAR Auction Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days KAR Auction Services has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Insperity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Insperity are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Insperity reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KAR Auction and Insperity

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

The idea behind KAR Auction Services and Insperity 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.