Correlation Between Advance Auto and Sdwestdeutsche Salzwerke

Can any of the company-specific risk be diversified away by investing in both Advance Auto and Sdwestdeutsche Salzwerke 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 Sdwestdeutsche Salzwerke 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 Sdwestdeutsche Salzwerke AG, you can compare the effects of market volatilities on Advance Auto and Sdwestdeutsche Salzwerke 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 Sdwestdeutsche Salzwerke. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Sdwestdeutsche Salzwerke.

Diversification Opportunities for Advance Auto and Sdwestdeutsche Salzwerke

-0.69

Correlation Coefficient

Advance Auto  Sdwestdeutsche Salzwerke

Excellent diversification

The 3 months correlation between Advance and Sdwestdeutsche is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Sdwestdeutsche Salzwerke AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sdwestdeutsche Salzwerke 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 Sdwestdeutsche Salzwerke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sdwestdeutsche Salzwerke has no effect on the direction of Advance Auto i.e., Advance Auto and Sdwestdeutsche Salzwerke go up and down completely randomly.

Pair Corralation between Advance Auto and Sdwestdeutsche Salzwerke

Considering the 90-day investment horizon Advance Auto Parts is expected to generate 0.67 times more return on investment than Sdwestdeutsche Salzwerke. However, Advance Auto Parts is 1.5 times less risky than Sdwestdeutsche Salzwerke. It trades about 0.24 of its potential returns per unit of risk. Sdwestdeutsche Salzwerke AG is currently generating about -0.03 per unit of risk. If you would invest  6,015  in Advance Auto Parts on January 25, 2024 and sell it today you would earn a total of  1,653  from holding Advance Auto Parts or generate 27.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Advance Auto Parts  vs.  Sdwestdeutsche Salzwerke AG

Advance Auto Parts

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advance Auto Parts are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Advance Auto reported solid returns over the last few months and may actually be approaching a breakup point.

Sdwestdeutsche Salzwerke

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sdwestdeutsche Salzwerke AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Advance Auto and Sdwestdeutsche Salzwerke

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

The idea behind Advance Auto Parts and Sdwestdeutsche Salzwerke AG 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.