Correlation Between Advance Auto and EBay
Can any of the company-specific risk be diversified away by investing in both Advance Auto and EBay 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 EBay 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 eBay Inc, you can compare the effects of market volatilities on Advance Auto and EBay 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 EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and EBay.
Diversification Opportunities for Advance Auto and EBay
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Advance and EBay is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Advance Auto i.e., Advance Auto and EBay go up and down completely randomly.
Pair Corralation between Advance Auto and EBay
Considering the 90-day investment horizon Advance Auto Parts is expected to under-perform the EBay. In addition to that, Advance Auto is 2.02 times more volatile than eBay Inc. It trades about -0.06 of its total potential returns per unit of risk. eBay Inc is currently generating about 0.07 per unit of volatility. If you would invest 4,434 in eBay Inc on August 31, 2024 and sell it today you would earn a total of 1,997 from holding eBay Inc or generate 45.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advance Auto Parts vs. eBay Inc
Performance |
| Timeline |
| Advance Auto Parts |
| eBay Inc |
Advance Auto and EBay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advance Auto and EBay
The main advantage of trading using opposite Advance Auto and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.| Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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