Correlation Between Inchcape Plc and AutoNation
Can any of the company-specific risk be diversified away by investing in both Inchcape Plc 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 Inchcape Plc and AutoNation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inchcape plc and AutoNation, you can compare the effects of market volatilities on Inchcape Plc 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 Inchcape Plc with a short position of AutoNation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inchcape Plc and AutoNation.
Diversification Opportunities for Inchcape Plc and AutoNation
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Inchcape and AutoNation is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Inchcape plc and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and Inchcape Plc 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 Inchcape plc 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 Inchcape Plc i.e., Inchcape Plc and AutoNation go up and down completely randomly.
Pair Corralation between Inchcape Plc and AutoNation
Assuming the 90 days trading horizon Inchcape plc is expected to generate 0.66 times more return on investment than AutoNation. However, Inchcape plc is 1.52 times less risky than AutoNation. It trades about 0.11 of its potential returns per unit of risk. AutoNation is currently generating about -0.03 per unit of risk. If you would invest 920.00 in Inchcape plc on September 24, 2024 and sell it today you would earn a total of 19.00 from holding Inchcape plc or generate 2.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inchcape plc vs. AutoNation
Performance |
| Timeline |
| Inchcape plc |
| AutoNation |
Inchcape Plc and AutoNation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inchcape Plc and AutoNation
The main advantage of trading using opposite Inchcape Plc and AutoNation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inchcape Plc 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.| Inchcape Plc vs. Copart Inc | Inchcape Plc vs. Zhongsheng Group Holdings | Inchcape Plc vs. CarMax Inc | Inchcape Plc vs. DIeteren Group SA |
| AutoNation vs. Copart Inc | AutoNation vs. Zhongsheng Group Holdings | AutoNation vs. CarMax Inc | AutoNation vs. DIeteren Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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