Correlation Between Advance Auto and CA Modas
Can any of the company-specific risk be diversified away by investing in both Advance Auto and CA Modas 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 Advance Auto and CA Modas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advance Auto Parts and CA Modas SA, you can compare the effects of market volatilities on Advance Auto and CA Modas 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 Advance Auto with a short position of CA Modas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and CA Modas.
Diversification Opportunities for Advance Auto and CA Modas
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Advance and CEAB3 is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and CA Modas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CA Modas SA and Advance Auto 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 Advance Auto Parts are associated (or correlated) with CA Modas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CA Modas SA has no effect on the direction of Advance Auto i.e., Advance Auto and CA Modas go up and down completely randomly.
Pair Corralation between Advance Auto and CA Modas
Assuming the 90 days trading horizon Advance Auto Parts is expected to under-perform the CA Modas. But the stock apears to be less risky and, when comparing its historical volatility, Advance Auto Parts is 1.28 times less risky than CA Modas. The stock trades about -0.05 of its potential returns per unit of risk. The CA Modas SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 239.00 in CA Modas SA on August 27, 2024 and sell it today you would earn a total of 1,006 from holding CA Modas SA or generate 420.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Advance Auto Parts vs. CA Modas SA
Performance |
| Timeline |
| Advance Auto Parts |
| CA Modas SA |
Advance Auto and CA Modas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advance Auto and CA Modas
The main advantage of trading using opposite Advance Auto and CA Modas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, CA Modas 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 CA Modas will offset losses from the drop in CA Modas' long position.| Advance Auto vs. Marfrig Global Foods | Advance Auto vs. Monster Beverage | Advance Auto vs. CVS Health | Advance Auto vs. Planet Fitness |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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