Correlation Between AutoNation and Dow Jones
Can any of the company-specific risk be diversified away by investing in both AutoNation and Dow Jones 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 AutoNation and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoNation and Dow Jones Industrial, you can compare the effects of market volatilities on AutoNation and Dow Jones 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 AutoNation with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and Dow Jones.
Diversification Opportunities for AutoNation and Dow Jones
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AutoNation and Dow is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and AutoNation 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 AutoNation are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of AutoNation i.e., AutoNation and Dow Jones go up and down completely randomly.
Pair Corralation between AutoNation and Dow Jones
Assuming the 90 days horizon AutoNation is expected to generate 2.01 times more return on investment than Dow Jones. However, AutoNation is 2.01 times more volatile than Dow Jones Industrial. It trades about -0.03 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.29 per unit of risk. If you would invest 16,415 in AutoNation on September 25, 2024 and sell it today you would lose (185.00) from holding AutoNation or give up 1.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
AutoNation vs. Dow Jones Industrial
Performance |
| Timeline |
AutoNation and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
AutoNation
Pair trading matchups for AutoNation
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with AutoNation and Dow Jones
The main advantage of trading using opposite AutoNation and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| AutoNation vs. Copart Inc | AutoNation vs. Zhongsheng Group Holdings | AutoNation vs. CarMax Inc | AutoNation vs. DIeteren Group SA |
| Dow Jones vs. Aerofoam Metals | Dow Jones vs. Lion One Metals | Dow Jones vs. Blue Moon Metals | Dow Jones vs. Xunlei Ltd Adr |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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