Correlation Between Target and Aarons
Can any of the company-specific risk be diversified away by investing in both Target and Aarons 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 Target and Aarons into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target and The Aarons, you can compare the effects of market volatilities on Target and Aarons 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 Target with a short position of Aarons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and Aarons.
Diversification Opportunities for Target and Aarons
Pay attention - limited upside
The 3 months correlation between Target and Aarons is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Target and The Aarons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarons and Target 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 Target are associated (or correlated) with Aarons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarons has no effect on the direction of Target i.e., Target and Aarons go up and down completely randomly.
Pair Corralation between Target and Aarons
Considering the 90-day investment horizon Target is expected to under-perform the Aarons. But the stock apears to be less risky and, when comparing its historical volatility, Target is 2.38 times less risky than Aarons. The stock trades about -0.16 of its potential returns per unit of risk. The The Aarons is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 731.00 in The Aarons on January 25, 2024 and sell it today you would earn a total of 6.00 from holding The Aarons or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target vs. The Aarons
Performance |
| Timeline |
| Target |
| Aarons |
Target and Aarons Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target and Aarons
The main advantage of trading using opposite Target and Aarons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target position performs unexpectedly, Aarons 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 Aarons will offset losses from the drop in Aarons' long position.| Target vs. Costco Wholesale Corp | Target vs. BJs Wholesale Club | Target vs. Dollar Tree | Target vs. Dollar General |
| Aarons vs. Custom Truck One | Aarons vs. PROG Holdings | Aarons vs. McGrath RentCorp | Aarons vs. HE Equipment Services |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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