Correlation Between Advance Auto and Five Below
Can any of the company-specific risk be diversified away by investing in both Advance Auto and Five Below 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 Five Below 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 Five Below, you can compare the effects of market volatilities on Advance Auto and Five Below 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 Five Below. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Five Below.
Diversification Opportunities for Advance Auto and Five Below
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Advance and Five is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below 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 Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of Advance Auto i.e., Advance Auto and Five Below go up and down completely randomly.
Pair Corralation between Advance Auto and Five Below
Considering the 90-day investment horizon Advance Auto Parts is expected to under-perform the Five Below. In addition to that, Advance Auto is 1.17 times more volatile than Five Below. It trades about -0.07 of its total potential returns per unit of risk. Five Below is currently generating about -0.04 per unit of volatility. If you would invest 18,059 in Five Below on August 27, 2024 and sell it today you would lose (9,367) from holding Five Below or give up 51.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advance Auto Parts vs. Five Below
Performance |
| Timeline |
| Advance Auto Parts |
| Five Below |
Advance Auto and Five Below Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advance Auto and Five Below
The main advantage of trading using opposite Advance Auto and Five Below positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Five Below 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 Five Below will offset losses from the drop in Five Below's long position.| Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
| Five Below vs. OReilly Automotive | Five Below vs. AutoZone | Five Below vs. Genuine Parts Co | Five Below vs. Williams Sonoma |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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