Correlation Between Group 1 and ODP Corp
Can any of the company-specific risk be diversified away by investing in both Group 1 and ODP Corp 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 Group 1 and ODP Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Group 1 Automotive and ODP Corp, you can compare the effects of market volatilities on Group 1 and ODP Corp 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 Group 1 with a short position of ODP Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and ODP Corp.
Diversification Opportunities for Group 1 and ODP Corp
Pay attention - limited upside
The 3 months correlation between Group and ODP is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and ODP Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODP Corp and Group 1 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 Group 1 Automotive are associated (or correlated) with ODP Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODP Corp has no effect on the direction of Group 1 i.e., Group 1 and ODP Corp go up and down completely randomly.
Pair Corralation between Group 1 and ODP Corp
Considering the 90-day investment horizon Group 1 Automotive is expected to generate 0.35 times more return on investment than ODP Corp. However, Group 1 Automotive is 2.82 times less risky than ODP Corp. It trades about 0.35 of its potential returns per unit of risk. ODP Corp is currently generating about 0.05 per unit of risk. If you would invest 41,846 in Group 1 Automotive on October 23, 2024 and sell it today you would earn a total of 2,920 from holding Group 1 Automotive or generate 6.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Group 1 Automotive vs. ODP Corp
Performance |
| Timeline |
| Group 1 Automotive |
| ODP Corp |
Group 1 and ODP Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Group 1 and ODP Corp
The main advantage of trading using opposite Group 1 and ODP Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, ODP Corp 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 ODP Corp will offset losses from the drop in ODP Corp's long position.| Group 1 vs. Penske Automotive Group | Group 1 vs. Lithia Motors | Group 1 vs. AutoNation | Group 1 vs. Asbury Automotive Group |
| ODP Corp vs. Leslies | ODP Corp vs. Sally Beauty Holdings | ODP Corp vs. 1 800 FLOWERSCOM | ODP Corp vs. Caseys General Stores |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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