Correlation Between Floor Decor and AutoNation
Can any of the company-specific risk be diversified away by investing in both Floor Decor 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 Floor Decor and AutoNation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Floor Decor Holdings and AutoNation, you can compare the effects of market volatilities on Floor Decor 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 Floor Decor with a short position of AutoNation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floor Decor and AutoNation.
Diversification Opportunities for Floor Decor and AutoNation
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Floor and AutoNation is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Floor Decor Holdings and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and Floor Decor 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 Floor Decor Holdings 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 Floor Decor i.e., Floor Decor and AutoNation go up and down completely randomly.
Pair Corralation between Floor Decor and AutoNation
Considering the 90-day investment horizon Floor Decor Holdings is expected to generate 1.92 times more return on investment than AutoNation. However, Floor Decor is 1.92 times more volatile than AutoNation. It trades about 0.11 of its potential returns per unit of risk. AutoNation is currently generating about 0.13 per unit of risk. If you would invest 10,245 in Floor Decor Holdings on September 19, 2024 and sell it today you would earn a total of 609.00 from holding Floor Decor Holdings or generate 5.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Floor Decor Holdings vs. AutoNation
Performance |
| Timeline |
| Floor Decor Holdings |
| AutoNation |
Floor Decor and AutoNation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Floor Decor and AutoNation
The main advantage of trading using opposite Floor Decor and AutoNation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Floor Decor 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.| Floor Decor vs. Aquagold International | Floor Decor vs. Thrivent High Yield | Floor Decor vs. Morningstar Unconstrained Allocation | Floor Decor vs. Via Renewables |
| AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation vs. Penske Automotive Group |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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