Correlation Between AutoNation and Relx PLC
Can any of the company-specific risk be diversified away by investing in both AutoNation and Relx PLC 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 Relx PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoNation and Relx PLC ADR, you can compare the effects of market volatilities on AutoNation and Relx PLC 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 Relx PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and Relx PLC.
Diversification Opportunities for AutoNation and Relx PLC
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between AutoNation and Relx is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Relx PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relx PLC ADR 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 Relx PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relx PLC ADR has no effect on the direction of AutoNation i.e., AutoNation and Relx PLC go up and down completely randomly.
Pair Corralation between AutoNation and Relx PLC
Allowing for the 90-day total investment horizon AutoNation is expected to generate 1.35 times more return on investment than Relx PLC. However, AutoNation is 1.35 times more volatile than Relx PLC ADR. It trades about 0.38 of its potential returns per unit of risk. Relx PLC ADR is currently generating about 0.07 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AutoNation vs. Relx PLC ADR
Performance |
| Timeline |
| AutoNation |
| Relx PLC ADR |
AutoNation and Relx PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoNation and Relx PLC
The main advantage of trading using opposite AutoNation and Relx PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation position performs unexpectedly, Relx PLC 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 Relx PLC will offset losses from the drop in Relx PLC's long position.| AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation vs. Penske Automotive Group |
| Relx PLC vs. Maximus | Relx PLC vs. CBIZ Inc | Relx PLC vs. First Advantage Corp | Relx PLC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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