Correlation Between Sally Beauty and Advance Auto
Can any of the company-specific risk be diversified away by investing in both Sally Beauty 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 Sally Beauty and Advance Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sally Beauty Holdings and Advance Auto Parts, you can compare the effects of market volatilities on Sally Beauty 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 Sally Beauty with a short position of Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sally Beauty and Advance Auto.
Diversification Opportunities for Sally Beauty and Advance Auto
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sally and Advance is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sally Beauty Holdings 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 Sally Beauty 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 Sally Beauty Holdings 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 Sally Beauty i.e., Sally Beauty and Advance Auto go up and down completely randomly.
Pair Corralation between Sally Beauty and Advance Auto
Considering the 90-day investment horizon Sally Beauty Holdings is expected to generate 1.0 times more return on investment than Advance Auto. However, Sally Beauty Holdings is 1.0 times less risky than Advance Auto. It trades about 0.03 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.06 per unit of risk. If you would invest 1,134 in Sally Beauty Holdings on August 30, 2024 and sell it today you would earn a total of 280.00 from holding Sally Beauty Holdings or generate 24.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sally Beauty Holdings vs. Advance Auto Parts
Performance |
| Timeline |
| Sally Beauty Holdings |
| Advance Auto Parts |
Sally Beauty and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sally Beauty and Advance Auto
The main advantage of trading using opposite Sally Beauty and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sally Beauty 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.| Sally Beauty vs. Leslies | Sally Beauty vs. National Vision Holdings | Sally Beauty vs. Sportsmans | Sally Beauty vs. MarineMax |
| 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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