Correlation Between Standard and Monro Muffler
Can any of the company-specific risk be diversified away by investing in both Standard and Monro Muffler 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 Standard and Monro Muffler into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Motor Products and Monro Muffler Brake, you can compare the effects of market volatilities on Standard and Monro Muffler 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 Standard with a short position of Monro Muffler. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard and Monro Muffler.
Diversification Opportunities for Standard and Monro Muffler
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Standard and Monro is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Standard Motor Products and Monro Muffler Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monro Muffler Brake and Standard 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 Standard Motor Products are associated (or correlated) with Monro Muffler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monro Muffler Brake has no effect on the direction of Standard i.e., Standard and Monro Muffler go up and down completely randomly.
Pair Corralation between Standard and Monro Muffler
Considering the 90-day investment horizon Standard Motor Products is expected to generate 0.43 times more return on investment than Monro Muffler. However, Standard Motor Products is 2.32 times less risky than Monro Muffler. It trades about -0.02 of its potential returns per unit of risk. Monro Muffler Brake is currently generating about -0.13 per unit of risk. If you would invest 3,090 in Standard Motor Products on November 18, 2024 and sell it today you would lose (18.00) from holding Standard Motor Products or give up 0.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Motor Products vs. Monro Muffler Brake
Performance |
| Timeline |
| Standard Motor Products |
| Monro Muffler Brake |
Standard and Monro Muffler Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard and Monro Muffler
The main advantage of trading using opposite Standard and Monro Muffler positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard position performs unexpectedly, Monro Muffler 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 Monro Muffler will offset losses from the drop in Monro Muffler's long position.| Standard vs. Dorman Products | Standard vs. Motorcar Parts of | Standard vs. Douglas Dynamics | Standard vs. Stoneridge |
| Monro Muffler vs. Motorcar Parts of | Monro Muffler vs. Standard Motor Products | Monro Muffler vs. Stoneridge | Monro Muffler vs. Douglas Dynamics |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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