Correlation Between OReilly Automotive and Joann

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

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

Diversification Opportunities for OReilly Automotive and Joann

-0.76

Correlation Coefficient

OReilly Automotive  Joann

Pay attention - limited upside

The 3 months correlation between OReilly and Joann is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding OReilly Automotive and Joann Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joann Inc and OReilly Automotive 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 OReilly Automotive are associated (or correlated) with Joann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joann Inc has no effect on the direction of OReilly Automotive i.e., OReilly Automotive and Joann go up and down completely randomly.

Pair Corralation between OReilly Automotive and Joann

Given the investment horizon of 90 days OReilly Automotive is expected to under-perform the Joann. But the stock apears to be less risky and, when comparing its historical volatility, OReilly Automotive is 13.16 times less risky than Joann. The stock trades about -0.17 of its potential returns per unit of risk. The Joann Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Joann Inc on January 26, 2024 and sell it today you would lose (1.05) from holding Joann Inc or give up 9.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

OReilly Automotive  vs.  Joann Inc

OReilly Automotive

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, OReilly Automotive may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Joann Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joann Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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.

Pair Trading with OReilly Automotive and Joann

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

The idea behind OReilly Automotive and Joann Inc 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.