Correlation Between AutoNation and First Advantage
Can any of the company-specific risk be diversified away by investing in both AutoNation and First Advantage 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 First Advantage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoNation and First Advantage Corp, you can compare the effects of market volatilities on AutoNation and First Advantage 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 First Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and First Advantage.
Diversification Opportunities for AutoNation and First Advantage
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AutoNation and First is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and First Advantage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Advantage 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 First Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Advantage Corp has no effect on the direction of AutoNation i.e., AutoNation and First Advantage go up and down completely randomly.
Pair Corralation between AutoNation and First Advantage
Allowing for the 90-day total investment horizon AutoNation is expected to generate 0.72 times more return on investment than First Advantage. However, AutoNation is 1.39 times less risky than First Advantage. It trades about 0.38 of its potential returns per unit of risk. First Advantage Corp is currently generating about 0.13 per unit of risk. If you would invest 15,547 in AutoNation on September 1, 2024 and sell it today you would earn a total of 2,342 from holding AutoNation or generate 15.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AutoNation vs. First Advantage Corp
Performance |
| Timeline |
| AutoNation |
| First Advantage Corp |
AutoNation and First Advantage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoNation and First Advantage
The main advantage of trading using opposite AutoNation and First Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation position performs unexpectedly, First Advantage 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 First Advantage will offset losses from the drop in First Advantage's long position.| AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation vs. Penske Automotive Group |
| First Advantage vs. Discount Print USA | First Advantage vs. Cass Information Systems | First Advantage vs. Civeo Corp | First Advantage vs. Network 1 Technologies |
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.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |