Correlation Between KAR Auction and Nuvve Holding

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

Diversification Opportunities for KAR Auction and Nuvve Holding

-0.62

Correlation Coefficient

KAR Auction  Nuvve Holding

Excellent diversification

The 3 months correlation between KAR and Nuvve is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Nuvve Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvve Holding Corp 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 Nuvve Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvve Holding Corp has no effect on the direction of KAR Auction i.e., KAR Auction and Nuvve Holding go up and down completely randomly.

Pair Corralation between KAR Auction and Nuvve Holding

Considering the 90-day investment horizon KAR Auction Services is expected to generate 0.19 times more return on investment than Nuvve Holding. However, KAR Auction Services is 5.28 times less risky than Nuvve Holding. It trades about 0.05 of its potential returns per unit of risk. Nuvve Holding Corp is currently generating about -0.04 per unit of risk. If you would invest  1,338  in KAR Auction Services on September 26, 2024 and sell it today you would earn a total of  695.00  from holding KAR Auction Services or generate 51.94% return on investment over 90 days.

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

KAR Auction Services  vs.  Nuvve Holding Corp

KAR Auction Services

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KAR Auction Services are ranked lower than 12 (%) 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.

Nuvve Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvve Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with KAR Auction and Nuvve Holding

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

The idea behind KAR Auction Services and Nuvve Holding Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.