Correlation Between AutoZone and American Assets

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

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

Diversification Opportunities for AutoZone and American Assets

-0.47

Correlation Coefficient

AutoZone  American Assets

Very good diversification

The 3 months correlation between AutoZone and American is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and American Assets Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Assets Trust and AutoZone 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 AutoZone are associated (or correlated) with American Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Assets Trust has no effect on the direction of AutoZone i.e., AutoZone and American Assets go up and down completely randomly.

Pair Corralation between AutoZone and American Assets

Considering the 90-day investment horizon AutoZone is expected to generate 0.66 times more return on investment than American Assets. However, AutoZone is 1.52 times less risky than American Assets. It trades about 0.04 of its potential returns per unit of risk. American Assets Trust is currently generating about -0.01 per unit of risk. If you would invest  247,868  in AutoZone on January 26, 2024 and sell it today you would earn a total of  50,983  from holding AutoZone or generate 20.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.73%
Values	Daily Returns

AutoZone  vs.  American Assets Trust

AutoZone

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, AutoZone may actually be approaching a critical reversion point that can send shares even higher in May 2024.

American Assets Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Assets Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with AutoZone and American Assets

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

The idea behind AutoZone and American Assets Trust 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..