Correlation Between AutoZone and EBay
Can any of the company-specific risk be diversified away by investing in both AutoZone and EBay 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 AutoZone and EBay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoZone and eBay Inc, you can compare the effects of market volatilities on AutoZone and EBay 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 AutoZone with a short position of EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoZone and EBay.
Diversification Opportunities for AutoZone and EBay
Very weak diversification
The 3 months correlation between AutoZone and EBay is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc and AutoZone 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 AutoZone are associated (or correlated) with EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of AutoZone i.e., AutoZone and EBay go up and down completely randomly.
Pair Corralation between AutoZone and EBay
Assuming the 90 days horizon AutoZone is expected to generate 1.55 times less return on investment than EBay. But when comparing it to its historical volatility, AutoZone is 1.21 times less risky than EBay. It trades about 0.05 of its potential returns per unit of risk. eBay Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,805 in eBay Inc on September 24, 2024 and sell it today you would earn a total of 2,301 from holding eBay Inc or generate 60.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AutoZone vs. eBay Inc
Performance |
| Timeline |
| AutoZone |
| eBay Inc |
AutoZone and EBay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoZone and EBay
The main advantage of trading using opposite AutoZone and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoZone position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.| AutoZone vs. ScanSource | AutoZone vs. PLANT VEDA FOODS | AutoZone vs. Ebro Foods SA | AutoZone vs. Boiron SA |
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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