Correlation Between AutoNation and Best Buy
Can any of the company-specific risk be diversified away by investing in both AutoNation and Best Buy 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 Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoNation and Best Buy Co, you can compare the effects of market volatilities on AutoNation and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and Best Buy.
Diversification Opportunities for AutoNation and Best Buy
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AutoNation and Best is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of AutoNation i.e., AutoNation and Best Buy go up and down completely randomly.
Pair Corralation between AutoNation and Best Buy
Allowing for the 90-day total investment horizon AutoNation is expected to generate 0.93 times more return on investment than Best Buy. However, AutoNation is 1.08 times less risky than Best Buy. It trades about 0.38 of its potential returns per unit of risk. Best Buy Co is currently generating about 0.07 per unit of risk. If you would invest 17,083 in AutoNation on November 11, 2024 and sell it today you would earn a total of 2,031 from holding AutoNation or generate 11.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AutoNation vs. Best Buy Co
Performance |
| Timeline |
| AutoNation |
| Best Buy |
AutoNation and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoNation and Best Buy
The main advantage of trading using opposite AutoNation and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.| AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation vs. Penske Automotive Group |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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