Correlation Between AutoNation and PlayAGS

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

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

Diversification Opportunities for AutoNation and PlayAGS

-0.19

Correlation Coefficient

AutoNation  PlayAGS

Good diversification

The 3 months correlation between AutoNation and PlayAGS is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and PlayAGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PlayAGS 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 PlayAGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PlayAGS has no effect on the direction of AutoNation i.e., AutoNation and PlayAGS go up and down completely randomly.

Pair Corralation between AutoNation and PlayAGS

Allowing for the 90-day total investment horizon AutoNation is expected to under-perform the PlayAGS. But the stock apears to be less risky and, when comparing its historical volatility, AutoNation is 2.03 times less risky than PlayAGS. The stock trades about -0.03 of its potential returns per unit of risk. The PlayAGS is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  870.00  in PlayAGS on January 26, 2024 and sell it today you would earn a total of  2.00  from holding PlayAGS or generate 0.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

AutoNation  vs.  PlayAGS

AutoNation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AutoNation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, AutoNation displayed solid returns over the last few months and may actually be approaching a breakup point.

PlayAGS

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PlayAGS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, PlayAGS may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with AutoNation and PlayAGS

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

The idea behind AutoNation and PlayAGS 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.