Correlation Between Advance Auto and Ceconomy
Can any of the company-specific risk be diversified away by investing in both Advance Auto and Ceconomy 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 Ceconomy 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 Ceconomy AG ADR, you can compare the effects of market volatilities on Advance Auto and Ceconomy 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 Ceconomy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Ceconomy.
Diversification Opportunities for Advance Auto and Ceconomy
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Advance and Ceconomy is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Ceconomy AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceconomy AG ADR 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 Ceconomy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceconomy AG ADR has no effect on the direction of Advance Auto i.e., Advance Auto and Ceconomy go up and down completely randomly.
Pair Corralation between Advance Auto and Ceconomy
Considering the 90-day investment horizon Advance Auto Parts is expected to generate 0.52 times more return on investment than Ceconomy. However, Advance Auto Parts is 1.94 times less risky than Ceconomy. It trades about 0.17 of its potential returns per unit of risk. Ceconomy AG ADR is currently generating about -0.01 per unit of risk. If you would invest 4,351 in Advance Auto Parts on October 23, 2024 and sell it today you would earn a total of 316.00 from holding Advance Auto Parts or generate 7.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Advance Auto Parts vs. Ceconomy AG ADR
Performance |
| Timeline |
| Advance Auto Parts |
| Ceconomy AG ADR |
Advance Auto and Ceconomy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advance Auto and Ceconomy
The main advantage of trading using opposite Advance Auto and Ceconomy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Ceconomy 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 Ceconomy will offset losses from the drop in Ceconomy's long position.| Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
| Ceconomy vs. AutoZone | Ceconomy vs. Advance Auto Parts | Ceconomy vs. Tractor Supply | Ceconomy vs. Genuine Parts Co |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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