Correlation Between Maximus and AutoNation

Can any of the company-specific risk be diversified away by investing in both Maximus and AutoNation 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 Maximus and AutoNation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Maximus and AutoNation, you can compare the effects of market volatilities on Maximus and AutoNation 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 Maximus with a short position of AutoNation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maximus and AutoNation.

Diversification Opportunities for Maximus and AutoNation

-0.13

Correlation Coefficient

Maximus  AutoNation

Good diversification

The 3 months correlation between Maximus and AutoNation is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Maximus and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and Maximus 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 Maximus are associated (or correlated) with AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Maximus i.e., Maximus and AutoNation go up and down completely randomly.

Pair Corralation between Maximus and AutoNation

Considering the 90-day investment horizon Maximus is expected to generate 1.61 times less return on investment than AutoNation. But when comparing it to its historical volatility, Maximus is 2.4 times less risky than AutoNation. It trades about 0.19 of its potential returns per unit of risk. AutoNation is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  15,679  in AutoNation on February 4, 2024 and sell it today you would earn a total of  839.00  from holding AutoNation or generate 5.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Maximus  vs.  AutoNation

Maximus

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Maximus are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Maximus is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

AutoNation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AutoNation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, AutoNation displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Maximus and AutoNation

The main advantage of trading using opposite Maximus and AutoNation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maximus position performs unexpectedly, AutoNation 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 AutoNation will offset losses from the drop in AutoNation's long position.

The idea behind Maximus and AutoNation 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.