Correlation Between Conns and AutoZone

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

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

Diversification Opportunities for Conns and AutoZone

-0.93

Correlation Coefficient

Conns  AutoZone

Pay attention - limited upside

The 3 months correlation between Conns and AutoZone is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Conns Inc and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone and Conns 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 Conns Inc 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 Conns i.e., Conns and AutoZone go up and down completely randomly.

Pair Corralation between Conns and AutoZone

Given the investment horizon of 90 days Conns Inc is expected to generate 6.66 times more return on investment than AutoZone. However, Conns is 6.66 times more volatile than AutoZone. It trades about 0.07 of its potential returns per unit of risk. AutoZone is currently generating about -0.3 per unit of risk. If you would invest  349.00  in Conns Inc on January 20, 2024 and sell it today you would earn a total of  20.00  from holding Conns Inc or generate 5.73% return on investment over 90 days.

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

Conns Inc  vs.  AutoZone

Conns Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conns Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm 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 weak basic indicators, AutoZone may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Conns and AutoZone

The main advantage of trading using opposite Conns and AutoZone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Conns 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 Conns Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.