Correlation Between AutoNation and Build A
Can any of the company-specific risk be diversified away by investing in both AutoNation and Build A 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 AutoNation and Build A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoNation and Build A Bear Workshop, you can compare the effects of market volatilities on AutoNation and Build A 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 AutoNation with a short position of Build A. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and Build A.
Diversification Opportunities for AutoNation and Build A
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AutoNation and Build is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Build A Bear Workshop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Build A Bear and AutoNation 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 AutoNation are associated (or correlated) with Build A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Build A Bear has no effect on the direction of AutoNation i.e., AutoNation and Build A go up and down completely randomly.
Pair Corralation between AutoNation and Build A
Allowing for the 90-day total investment horizon AutoNation is expected to generate 0.87 times more return on investment than Build A. However, AutoNation is 1.15 times less risky than Build A. It trades about 0.11 of its potential returns per unit of risk. Build A Bear Workshop is currently generating about 0.06 per unit of risk. If you would invest 13,197 in AutoNation on February 14, 2024 and sell it today you would earn a total of 3,684 from holding AutoNation or generate 27.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 99.19% |
Values | Daily Returns |
AutoNation vs. Build A Bear Workshop
Performance |
Timeline |
AutoNation |
Build A Bear |
AutoNation and Build A Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AutoNation and Build A
The main advantage of trading using opposite AutoNation and Build A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation position performs unexpectedly, Build A 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 Build A will offset losses from the drop in Build A's long position.AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation vs. Penske 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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