Correlation Between National Retail and Auto Trader
Can any of the company-specific risk be diversified away by investing in both National Retail and Auto Trader 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 National Retail and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Retail Properties and Auto Trader Group, you can compare the effects of market volatilities on National Retail and Auto Trader 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 National Retail with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Retail and Auto Trader.
Diversification Opportunities for National Retail and Auto Trader
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Auto is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and National Retail 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 National Retail Properties are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of National Retail i.e., National Retail and Auto Trader go up and down completely randomly.
Pair Corralation between National Retail and Auto Trader
Assuming the 90 days trading horizon National Retail Properties is expected to generate 1.09 times more return on investment than Auto Trader. However, National Retail is 1.09 times more volatile than Auto Trader Group. It trades about -0.03 of its potential returns per unit of risk. Auto Trader Group is currently generating about -0.09 per unit of risk. If you would invest 4,245 in National Retail Properties on August 28, 2024 and sell it today you would lose (76.00) from holding National Retail Properties or give up 1.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
National Retail Properties vs. Auto Trader Group
Performance |
| Timeline |
| National Retail Prop |
| Auto Trader Group |
National Retail and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Retail and Auto Trader
The main advantage of trading using opposite National Retail and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| National Retail vs. Apple Inc | National Retail vs. Apple Inc | National Retail vs. Apple Inc | National Retail vs. Apple Inc |
| Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |