Correlation Between Tile Shop and Americas Car
Can any of the company-specific risk be diversified away by investing in both Tile Shop and Americas Car 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 Tile Shop and Americas Car into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tile Shop Holdings and Americas Car Mart, you can compare the effects of market volatilities on Tile Shop and Americas Car 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 Tile Shop with a short position of Americas Car. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tile Shop and Americas Car.
Diversification Opportunities for Tile Shop and Americas Car
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Tile and Americas is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tile Shop Holdings and Americas Car Mart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americas Car Mart and Tile Shop 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 Tile Shop Holdings are associated (or correlated) with Americas Car. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americas Car Mart has no effect on the direction of Tile Shop i.e., Tile Shop and Americas Car go up and down completely randomly.
Pair Corralation between Tile Shop and Americas Car
Given the investment horizon of 90 days Tile Shop is expected to generate 5.45 times less return on investment than Americas Car. But when comparing it to its historical volatility, Tile Shop Holdings is 1.22 times less risky than Americas Car. It trades about 0.05 of its potential returns per unit of risk. Americas Car Mart is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 4,026 in Americas Car Mart on August 27, 2024 and sell it today you would earn a total of 461.00 from holding Americas Car Mart or generate 11.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tile Shop Holdings vs. Americas Car Mart
Performance |
| Timeline |
| Tile Shop Holdings |
| Americas Car Mart |
Tile Shop and Americas Car Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tile Shop and Americas Car
The main advantage of trading using opposite Tile Shop and Americas Car positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tile Shop position performs unexpectedly, Americas Car 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 Americas Car will offset losses from the drop in Americas Car's long position.| Tile Shop vs. Haverty Furniture Companies | Tile Shop vs. Arhaus Inc | Tile Shop vs. Kirklands | Tile Shop vs. Floor Decor Holdings |
| Americas Car vs. Sonic Automotive | Americas Car vs. Lithia Motors | Americas Car vs. AutoNation | Americas Car vs. Asbury 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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