Correlation Between Advance Auto and 1 800

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Can any of the company-specific risk be diversified away by investing in both Advance Auto and 1 800 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 Advance Auto and 1 800 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advance Auto Parts and 1 800 FLOWERSCOM, you can compare the effects of market volatilities on Advance Auto and 1 800 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 Advance Auto with a short position of 1 800. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and 1 800.

Diversification Opportunities for Advance Auto and 1 800

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Advance and FLWS is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and 1-800 FLOWERSCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1-800 FLOWERSCOM and Advance Auto 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 Advance Auto Parts are associated (or correlated) with 1 800. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1-800 FLOWERSCOM has no effect on the direction of Advance Auto i.e., Advance Auto and 1 800 go up and down completely randomly.

Pair Corralation between Advance Auto and 1 800

Considering the 90-day investment horizon Advance Auto Parts is expected to under-perform the 1 800. But the stock apears to be less risky and, when comparing its historical volatility, Advance Auto Parts is 1.33 times less risky than 1 800. The stock trades about -0.04 of its potential returns per unit of risk. The 1 800 FLOWERSCOM is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,025  in 1 800 FLOWERSCOM on December 29, 2023 and sell it today you would earn a total of  67.00  from holding 1 800 FLOWERSCOM or generate 6.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Advance Auto Parts  vs.  1-800 FLOWERSCOM

 Performance 
       Timeline  
Advance Auto Parts 

Risk-Adjusted Performance

21 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Advance Auto Parts are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Advance Auto reported solid returns over the last few months and may actually be approaching a breakup point.
1-800 FLOWERSCOM 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in 1 800 FLOWERSCOM are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, 1 800 is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Advance Auto and 1 800 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Advance Auto and 1 800

The main advantage of trading using opposite Advance Auto and 1 800 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, 1 800 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 1 800 will offset losses from the drop in 1 800's long position.
The idea behind Advance Auto Parts and 1 800 FLOWERSCOM 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.
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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