Correlation Between Bed Bath and AutoZone

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

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

Diversification Opportunities for Bed Bath and AutoZone

-0.24

Correlation Coefficient

Bed Bath  AutoZone

Very good diversification

The 3 months correlation between Bed and AutoZone is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bed Bath Beyond and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone and Bed Bath 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 Bed Bath Beyond are associated (or correlated) with AutoZone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoZone has no effect on the direction of Bed Bath i.e., Bed Bath and AutoZone go up and down completely randomly.

Pair Corralation between Bed Bath and AutoZone

If you would invest  30.00  in Bed Bath Beyond on January 26, 2024 and sell it today you would earn a total of  0.00  from holding Bed Bath Beyond or generate 0.0% return on investment over 90 days.

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

Bed Bath Beyond  vs.  AutoZone

Bed Bath Beyond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bed Bath Beyond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Bed Bath is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Bed Bath and AutoZone

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

The idea behind Bed Bath Beyond and AutoZone 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.