Correlation Between AutoNation and Tenneco

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

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

Diversification Opportunities for AutoNation and Tenneco

0.04

Correlation Coefficient

AutoNation  Tenneco

Significant diversification

The 3 months correlation between AutoNation and Tenneco is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Tenneco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenneco 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 Tenneco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenneco has no effect on the direction of AutoNation i.e., AutoNation and Tenneco go up and down completely randomly.

Pair Corralation between AutoNation and Tenneco

If you would invest  1,999  in Tenneco on January 24, 2024 and sell it today you would earn a total of  0.00  from holding Tenneco or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

AutoNation  vs.  Tenneco

AutoNation

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AutoNation are ranked lower than 10 (%) 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.

Tenneco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tenneco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Tenneco is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AutoNation and Tenneco

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

The idea behind AutoNation and Tenneco 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.