Correlation Between Lowes Companies and Advance Auto
Can any of the company-specific risk be diversified away by investing in both Lowes Companies and Advance Auto 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 Lowes Companies and Advance Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and Advance Auto Parts, you can compare the effects of market volatilities on Lowes Companies and Advance Auto 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 Lowes Companies with a short position of Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and Advance Auto.
Diversification Opportunities for Lowes Companies and Advance Auto
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lowes and Advance is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts and Lowes Companies 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 Lowes Companies are associated (or correlated) with Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of Lowes Companies i.e., Lowes Companies and Advance Auto go up and down completely randomly.
Pair Corralation between Lowes Companies and Advance Auto
Considering the 90-day investment horizon Lowes Companies is expected to generate 0.48 times more return on investment than Advance Auto. However, Lowes Companies is 2.07 times less risky than Advance Auto. It trades about 0.04 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.07 per unit of risk. If you would invest 20,651 in Lowes Companies on August 23, 2024 and sell it today you would earn a total of 5,652 from holding Lowes Companies or generate 27.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. Advance Auto Parts
Performance |
| Timeline |
| Lowes Companies |
| Advance Auto Parts |
Lowes Companies and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and Advance Auto
The main advantage of trading using opposite Lowes Companies and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.| Lowes Companies vs. Floor Decor Holdings | Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies | Lowes Companies vs. Home Depot |
| Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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