Correlation Between KAR Auction and SAG Holdings

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

Diversification Opportunities for KAR Auction and SAG Holdings

-0.43

Correlation Coefficient

KAR Auction  SAG Holdings

Very good diversification

The 3 months correlation between KAR and SAG is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and SAG Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAG Holdings 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 SAG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAG Holdings Limited has no effect on the direction of KAR Auction i.e., KAR Auction and SAG Holdings go up and down completely randomly.

Pair Corralation between KAR Auction and SAG Holdings

Considering the 90-day investment horizon KAR Auction is expected to generate 6.56 times less return on investment than SAG Holdings. But when comparing it to its historical volatility, KAR Auction Services is 4.84 times less risky than SAG Holdings. It trades about 0.06 of its potential returns per unit of risk. SAG Holdings Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  255.00  in SAG Holdings Limited on October 8, 2024 and sell it today you would earn a total of  31.00  from holding SAG Holdings Limited or generate 12.16% return on investment over 90 days.

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

KAR Auction Services  vs.  SAG Holdings 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.

SAG Holdings Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAG Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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 SAG Holdings

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

The idea behind KAR Auction Services and SAG Holdings 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.