Correlation Between Kirklands and AutoNation

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

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

Diversification Opportunities for Kirklands and AutoNation

-0.73

Correlation Coefficient

Kirklands  AutoNation

Pay attention - limited upside

The 3 months correlation between Kirklands and AutoNation is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Kirklands and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and Kirklands 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 Kirklands 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 Kirklands i.e., Kirklands and AutoNation go up and down completely randomly.

Pair Corralation between Kirklands and AutoNation

Given the investment horizon of 90 days Kirklands is expected to under-perform the AutoNation. In addition to that, Kirklands is 2.36 times more volatile than AutoNation. It trades about -0.1 of its total potential returns per unit of risk. AutoNation is currently generating about 0.2 per unit of volatility. If you would invest  13,800  in AutoNation on February 22, 2024 and sell it today you would earn a total of  3,144  from holding AutoNation or generate 22.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Kirklands  vs.  AutoNation

Kirklands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kirklands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

AutoNation

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AutoNation are ranked lower than 15 (%) 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 Kirklands and AutoNation

The main advantage of trading using opposite Kirklands and AutoNation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kirklands 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 Kirklands 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..