Correlation Between Build A and AutoNation
Can any of the company-specific risk be diversified away by investing in both Build A and AutoNation 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 Build A and AutoNation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Build A Bear Workshop and AutoNation, you can compare the effects of market volatilities on Build A and AutoNation 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 Build A with a short position of AutoNation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Build A and AutoNation.
Diversification Opportunities for Build A and AutoNation
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Build and AutoNation is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and Build A 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 Build A Bear Workshop are associated (or correlated) with AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Build A i.e., Build A and AutoNation go up and down completely randomly.
Pair Corralation between Build A and AutoNation
Considering the 90-day investment horizon Build A Bear Workshop is expected to generate 1.17 times more return on investment than AutoNation. However, Build A is 1.17 times more volatile than AutoNation. It trades about 0.08 of its potential returns per unit of risk. AutoNation is currently generating about 0.04 per unit of risk. If you would invest 2,018 in Build A Bear Workshop on August 27, 2024 and sell it today you would earn a total of 1,801 from holding Build A Bear Workshop or generate 89.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Build A Bear Workshop vs. AutoNation
Performance |
| Timeline |
| Build A Bear |
| AutoNation |
Build A and AutoNation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Build A and AutoNation
The main advantage of trading using opposite Build A and AutoNation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build A position performs unexpectedly, AutoNation 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 AutoNation will offset losses from the drop in AutoNation's long position.The idea behind Build A Bear Workshop and AutoNation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| AutoNation vs. Kingsway Financial Services | AutoNation vs. KAR Auction Services | AutoNation vs. Cango Inc | AutoNation vs. Vroom Inc |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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