Correlation Between Tile Shop and Monro Muffler
Can any of the company-specific risk be diversified away by investing in both Tile Shop 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 Tile Shop and Monro Muffler 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 Monro Muffler Brake, you can compare the effects of market volatilities on Tile Shop 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 Tile Shop with a short position of Monro Muffler. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tile Shop and Monro Muffler.
Diversification Opportunities for Tile Shop and Monro Muffler
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tile and Monro is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tile Shop Holdings 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 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 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 Tile Shop i.e., Tile Shop and Monro Muffler go up and down completely randomly.
Pair Corralation between Tile Shop and Monro Muffler
Given the investment horizon of 90 days Tile Shop Holdings is expected to generate 0.92 times more return on investment than Monro Muffler. However, Tile Shop Holdings is 1.09 times less risky than Monro Muffler. It trades about 0.05 of its potential returns per unit of risk. Monro Muffler Brake is currently generating about -0.04 per unit of risk. If you would invest 451.00 in Tile Shop Holdings on August 27, 2024 and sell it today you would earn a total of 210.00 from holding Tile Shop Holdings or generate 46.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tile Shop Holdings vs. Monro Muffler Brake
Performance |
| Timeline |
| Tile Shop Holdings |
| Monro Muffler Brake |
Tile Shop and Monro Muffler Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tile Shop and Monro Muffler
The main advantage of trading using opposite Tile Shop and Monro Muffler positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tile Shop 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.The idea behind Tile Shop Holdings and Monro Muffler Brake pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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