Correlation Between AutoNation and Dennys Corp
Can any of the company-specific risk be diversified away by investing in both AutoNation and Dennys Corp 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 Dennys Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoNation and Dennys Corp, you can compare the effects of market volatilities on AutoNation and Dennys Corp 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 Dennys Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and Dennys Corp.
Diversification Opportunities for AutoNation and Dennys Corp
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AutoNation and Dennys is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Dennys Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dennys Corp 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 Dennys Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dennys Corp has no effect on the direction of AutoNation i.e., AutoNation and Dennys Corp go up and down completely randomly.
Pair Corralation between AutoNation and Dennys Corp
Allowing for the 90-day total investment horizon AutoNation is expected to generate 0.43 times more return on investment than Dennys Corp. However, AutoNation is 2.34 times less risky than Dennys Corp. It trades about 0.44 of its potential returns per unit of risk. Dennys Corp is currently generating about 0.03 per unit of risk. If you would invest 16,694 in AutoNation on November 3, 2024 and sell it today you would earn a total of 2,161 from holding AutoNation or generate 12.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AutoNation vs. Dennys Corp
Performance |
| Timeline |
| AutoNation |
| Dennys Corp |
AutoNation and Dennys Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoNation and Dennys Corp
The main advantage of trading using opposite AutoNation and Dennys Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation position performs unexpectedly, Dennys Corp 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 Dennys Corp will offset losses from the drop in Dennys Corp's long position.| AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation vs. Penske Automotive Group |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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