Correlation Between Mistras and KAR Auction

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

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

Diversification Opportunities for Mistras and KAR Auction

-0.65

Correlation Coefficient

Mistras  KAR Auction

Excellent diversification

The 3 months correlation between Mistras and KAR is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Mistras Group and KAR Auction Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAR Auction Services and Mistras 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 Mistras Group are associated (or correlated) with KAR Auction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAR Auction Services has no effect on the direction of Mistras i.e., Mistras and KAR Auction go up and down completely randomly.

Pair Corralation between Mistras and KAR Auction

Allowing for the 90-day total investment horizon Mistras Group is expected to under-perform the KAR Auction. In addition to that, Mistras is 1.8 times more volatile than KAR Auction Services. It trades about -0.12 of its total potential returns per unit of risk. KAR Auction Services is currently generating about 0.32 per unit of volatility. If you would invest  1,633  in KAR Auction Services on August 30, 2024 and sell it today you would earn a total of  378.00  from holding KAR Auction Services or generate 23.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Mistras Group  vs.  KAR Auction Services

Mistras Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mistras Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

KAR Auction Services

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KAR Auction Services are ranked lower than 9 (%) 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.

Pair Trading with Mistras and KAR Auction

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

The idea behind Mistras Group and KAR Auction Services 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.