Correlation Between Kingsway Financial and CarGurus

Can any of the company-specific risk be diversified away by investing in both Kingsway Financial and CarGurus 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 Kingsway Financial and CarGurus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kingsway Financial Services and CarGurus, you can compare the effects of market volatilities on Kingsway Financial and CarGurus 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 Kingsway Financial with a short position of CarGurus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingsway Financial and CarGurus.

Diversification Opportunities for Kingsway Financial and CarGurus

0.57

Correlation Coefficient

Kingsway Financial  CarGurus

Very weak diversification

The 3 months correlation between Kingsway and CarGurus is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Kingsway Financial Services and CarGurus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarGurus and Kingsway Financial 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 Kingsway Financial Services are associated (or correlated) with CarGurus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarGurus has no effect on the direction of Kingsway Financial i.e., Kingsway Financial and CarGurus go up and down completely randomly.

Pair Corralation between Kingsway Financial and CarGurus

Considering the 90-day investment horizon Kingsway Financial Services is expected to generate 0.65 times more return on investment than CarGurus. However, Kingsway Financial Services is 1.54 times less risky than CarGurus. It trades about -0.03 of its potential returns per unit of risk. CarGurus is currently generating about -0.12 per unit of risk. If you would invest  846.00  in Kingsway Financial Services on December 30, 2024 and sell it today you would lose (41.00) from holding Kingsway Financial Services or give up 4.85% of portfolio value over 90 days.

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

Kingsway Financial Services  vs.  CarGurus

Kingsway Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kingsway Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Kingsway Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

CarGurus

Risk-Adjusted Performance

Very Weak

Over the last 90 days CarGurus 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Kingsway Financial and CarGurus

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

The idea behind Kingsway Financial Services and CarGurus 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.