Correlation Between AutoZone and Bath Body
Can any of the company-specific risk be diversified away by investing in both AutoZone and Bath Body 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 Bath Body into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoZone and Bath Body Works, you can compare the effects of market volatilities on AutoZone and Bath Body 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 Bath Body. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoZone and Bath Body.
Diversification Opportunities for AutoZone and Bath Body
Poor diversification
The 3 months correlation between AutoZone and Bath is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works 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 Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of AutoZone i.e., AutoZone and Bath Body go up and down completely randomly.
Pair Corralation between AutoZone and Bath Body
Considering the 90-day investment horizon AutoZone is expected to generate 0.48 times more return on investment than Bath Body. However, AutoZone is 2.07 times less risky than Bath Body. It trades about -0.3 of its potential returns per unit of risk. Bath Body Works is currently generating about -0.19 per unit of risk. If you would invest 318,738 in AutoZone on January 20, 2024 and sell it today you would lose (21,421) from holding AutoZone or give up 6.72% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.65% |
Values | Daily Returns |
AutoZone vs. Bath Body Works
Performance |
Timeline |
AutoZone |
Bath Body Works |
AutoZone and Bath Body Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AutoZone and Bath Body
The main advantage of trading using opposite AutoZone and Bath Body positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoZone position performs unexpectedly, Bath Body 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 Bath Body will offset losses from the drop in Bath Body's long position.AutoZone vs. Advance Auto Parts | AutoZone vs. Tractor Supply | AutoZone vs. Genuine Parts Co | AutoZone vs. Five Below |
Bath Body vs. OReilly Automotive | Bath Body vs. AutoZone | Bath Body vs. Genuine Parts Co | Bath Body vs. Williams Sonoma |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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