Correlation Between Advance Auto and Warby Parker
Can any of the company-specific risk be diversified away by investing in both Advance Auto and Warby Parker 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 Warby Parker 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 Warby Parker, you can compare the effects of market volatilities on Advance Auto and Warby Parker 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 Warby Parker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Warby Parker.
Diversification Opportunities for Advance Auto and Warby Parker
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Advance and Warby is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Warby Parker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warby Parker 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 Warby Parker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warby Parker has no effect on the direction of Advance Auto i.e., Advance Auto and Warby Parker go up and down completely randomly.
Pair Corralation between Advance Auto and Warby Parker
Considering the 90-day investment horizon Advance Auto is expected to generate 1.93 times less return on investment than Warby Parker. But when comparing it to its historical volatility, Advance Auto Parts is 1.0 times less risky than Warby Parker. It trades about 0.13 of its potential returns per unit of risk. Warby Parker is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,558 in Warby Parker on October 31, 2024 and sell it today you would earn a total of 1,133 from holding Warby Parker or generate 72.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advance Auto Parts vs. Warby Parker
Performance |
| Timeline |
| Advance Auto Parts |
| Warby Parker |
Advance Auto and Warby Parker Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advance Auto and Warby Parker
The main advantage of trading using opposite Advance Auto and Warby Parker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Warby Parker 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 Warby Parker will offset losses from the drop in Warby Parker's long position.| Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
| Warby Parker vs. Alcon AG | Warby Parker vs. The Cooper Companies, | Warby Parker vs. AngioDynamics | Warby Parker vs. AptarGroup |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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