Correlation Between ODP Corp and AutoNation
Can any of the company-specific risk be diversified away by investing in both ODP Corp 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 ODP Corp and AutoNation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ODP Corp and AutoNation, you can compare the effects of market volatilities on ODP Corp 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 ODP Corp with a short position of AutoNation. Check out your portfolio center. Please also check ongoing floating volatility patterns of ODP Corp and AutoNation.
Diversification Opportunities for ODP Corp and AutoNation
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ODP and AutoNation is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding ODP Corp and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and ODP Corp 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 ODP Corp 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 ODP Corp i.e., ODP Corp and AutoNation go up and down completely randomly.
Pair Corralation between ODP Corp and AutoNation
Considering the 90-day investment horizon ODP Corp is expected to under-perform the AutoNation. In addition to that, ODP Corp is 1.37 times more volatile than AutoNation. It trades about -0.05 of its total potential returns per unit of risk. AutoNation is currently generating about 0.03 per unit of volatility. If you would invest 15,730 in AutoNation on November 8, 2024 and sell it today you would earn a total of 3,733 from holding AutoNation or generate 23.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ODP Corp vs. AutoNation
Performance |
| Timeline |
| ODP Corp |
| AutoNation |
ODP Corp and AutoNation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ODP Corp and AutoNation
The main advantage of trading using opposite ODP Corp and AutoNation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ODP Corp 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.| ODP Corp vs. Leslies | ODP Corp vs. Sally Beauty Holdings | ODP Corp vs. 1 800 FLOWERSCOM | ODP Corp vs. Caseys General Stores |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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