Correlation Between AutoNation and Alphabet
Can any of the company-specific risk be diversified away by investing in both AutoNation and Alphabet 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 Alphabet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoNation and Alphabet Inc Class C, you can compare the effects of market volatilities on AutoNation and Alphabet 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 Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and Alphabet.
Diversification Opportunities for AutoNation and Alphabet
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between AutoNation and Alphabet is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Alphabet Inc Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of AutoNation i.e., AutoNation and Alphabet go up and down completely randomly.
Pair Corralation between AutoNation and Alphabet
Allowing for the 90-day total investment horizon AutoNation is expected to under-perform the Alphabet. In addition to that, AutoNation is 1.25 times more volatile than Alphabet Inc Class C. It trades about -0.05 of its total potential returns per unit of risk. Alphabet Inc Class C is currently generating about 0.21 per unit of volatility. If you would invest 15,115 in Alphabet Inc Class C on January 24, 2024 and sell it today you would earn a total of 877.00 from holding Alphabet Inc Class C or generate 5.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
AutoNation vs. Alphabet Inc Class C
Performance |
| Timeline |
| AutoNation |
| Alphabet Class C |
AutoNation and Alphabet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoNation and Alphabet
The main advantage of trading using opposite AutoNation and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet'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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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