Correlation Between AutoNation and Advance Auto
Can any of the company-specific risk be diversified away by investing in both AutoNation and Advance Auto 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 AutoNation and Advance Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoNation and Advance Auto Parts, you can compare the effects of market volatilities on AutoNation and Advance Auto 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 AutoNation with a short position of Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and Advance Auto.
Diversification Opportunities for AutoNation and Advance Auto
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AutoNation and Advance is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts and AutoNation 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 AutoNation are associated (or correlated) with Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of AutoNation i.e., AutoNation and Advance Auto go up and down completely randomly.
Pair Corralation between AutoNation and Advance Auto
Allowing for the 90-day total investment horizon AutoNation is expected to generate 0.73 times more return on investment than Advance Auto. However, AutoNation is 1.38 times less risky than Advance Auto. It trades about 0.05 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.06 per unit of risk. If you would invest 11,624 in AutoNation on August 30, 2024 and sell it today you would earn a total of 6,298 from holding AutoNation or generate 54.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AutoNation vs. Advance Auto Parts
Performance |
| Timeline |
| AutoNation |
| Advance Auto Parts |
AutoNation and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoNation and Advance Auto
The main advantage of trading using opposite AutoNation and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.| AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation vs. Penske Automotive Group |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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