Correlation Between PetMed Express and Advance Auto
Can any of the company-specific risk be diversified away by investing in both PetMed Express 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 PetMed Express and Advance Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetMed Express and Advance Auto Parts, you can compare the effects of market volatilities on PetMed Express 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 PetMed Express with a short position of Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetMed Express and Advance Auto.
Diversification Opportunities for PetMed Express and Advance Auto
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PetMed and Advance is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding PetMed Express 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 PetMed Express 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 PetMed Express 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 PetMed Express i.e., PetMed Express and Advance Auto go up and down completely randomly.
Pair Corralation between PetMed Express and Advance Auto
Given the investment horizon of 90 days PetMed Express is expected to generate about the same return on investment as Advance Auto Parts. However, PetMed Express is 1.18 times more volatile than Advance Auto Parts. It trades about -0.06 of its potential returns per unit of risk. Advance Auto Parts is currently producing about -0.07 per unit of risk. If you would invest 14,564 in Advance Auto Parts on August 23, 2024 and sell it today you would lose (10,695) from holding Advance Auto Parts or give up 73.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PetMed Express vs. Advance Auto Parts
Performance |
| Timeline |
| PetMed Express |
| Advance Auto Parts |
PetMed Express and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PetMed Express and Advance Auto
The main advantage of trading using opposite PetMed Express and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetMed Express 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.| PetMed Express vs. High Tide | PetMed Express vs. China Jo Jo Drugstores | PetMed Express vs. Walgreens Boots Alliance | PetMed Express vs. 111 Inc |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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