Correlation Between Lear and Monro Muffler
Can any of the company-specific risk be diversified away by investing in both Lear and Monro Muffler 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 Lear and Monro Muffler into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lear Corporation and Monro Muffler Brake, you can compare the effects of market volatilities on Lear and Monro Muffler 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 Lear with a short position of Monro Muffler. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lear and Monro Muffler.
Diversification Opportunities for Lear and Monro Muffler
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lear and Monro is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lear Corp. and Monro Muffler Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monro Muffler Brake and Lear 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 Lear Corporation are associated (or correlated) with Monro Muffler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monro Muffler Brake has no effect on the direction of Lear i.e., Lear and Monro Muffler go up and down completely randomly.
Pair Corralation between Lear and Monro Muffler
Considering the 90-day investment horizon Lear Corporation is expected to under-perform the Monro Muffler. But the stock apears to be less risky and, when comparing its historical volatility, Lear Corporation is 1.54 times less risky than Monro Muffler. The stock trades about -0.06 of its potential returns per unit of risk. The Monro Muffler Brake is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,779 in Monro Muffler Brake on August 26, 2024 and sell it today you would lose (75.00) from holding Monro Muffler Brake or give up 2.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lear Corp. vs. Monro Muffler Brake
Performance |
| Timeline |
| Lear |
| Monro Muffler Brake |
Lear and Monro Muffler Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lear and Monro Muffler
The main advantage of trading using opposite Lear and Monro Muffler positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lear position performs unexpectedly, Monro Muffler 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 Monro Muffler will offset losses from the drop in Monro Muffler's long position.The idea behind Lear Corporation and Monro Muffler Brake 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.| Monro Muffler vs. Motorcar Parts of | Monro Muffler vs. Standard Motor Products | Monro Muffler vs. Stoneridge | Monro Muffler vs. Douglas Dynamics |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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