Correlation Between Advance Auto and Adient PLC
Can any of the company-specific risk be diversified away by investing in both Advance Auto and Adient PLC 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 Advance Auto and Adient PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advance Auto Parts and Adient PLC, you can compare the effects of market volatilities on Advance Auto and Adient PLC 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 Advance Auto with a short position of Adient PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Adient PLC.
Diversification Opportunities for Advance Auto and Adient PLC
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Advance and Adient is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Adient PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adient PLC and Advance Auto 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 Advance Auto Parts are associated (or correlated) with Adient PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adient PLC has no effect on the direction of Advance Auto i.e., Advance Auto and Adient PLC go up and down completely randomly.
Pair Corralation between Advance Auto and Adient PLC
Considering the 90-day investment horizon Advance Auto Parts is expected to generate 1.08 times more return on investment than Adient PLC. However, Advance Auto is 1.08 times more volatile than Adient PLC. It trades about -0.12 of its potential returns per unit of risk. Adient PLC is currently generating about -0.26 per unit of risk. If you would invest 8,398 in Advance Auto Parts on January 25, 2024 and sell it today you would lose (598.00) from holding Advance Auto Parts or give up 7.12% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Advance Auto Parts vs. Adient PLC
Performance |
Timeline |
Advance Auto Parts |
Adient PLC |
Advance Auto and Adient PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Advance Auto and Adient PLC
The main advantage of trading using opposite Advance Auto and Adient PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Adient PLC 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 Adient PLC will offset losses from the drop in Adient PLC's long position.Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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