Correlation Between Tuesday Morning and AutoZone

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

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

Diversification Opportunities for Tuesday Morning and AutoZone

-0.16

Correlation Coefficient

Tuesday Morning  AutoZone

Good diversification

The 3 months correlation between Tuesday and AutoZone is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Tuesday Morning Corp and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone and Tuesday Morning 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 Tuesday Morning Corp 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 Tuesday Morning i.e., Tuesday Morning and AutoZone go up and down completely randomly.

Pair Corralation between Tuesday Morning and AutoZone

Given the investment horizon of 90 days Tuesday Morning Corp is expected to generate 52.85 times more return on investment than AutoZone. However, Tuesday Morning is 52.85 times more volatile than AutoZone. It trades about 0.06 of its potential returns per unit of risk. AutoZone is currently generating about 0.06 per unit of risk. If you would invest  2,871  in Tuesday Morning Corp on January 24, 2024 and sell it today you would lose (2,871) from holding Tuesday Morning Corp or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.74%
Values	Daily Returns

Tuesday Morning Corp  vs.  AutoZone

Tuesday Morning Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tuesday Morning Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Tuesday Morning is not utilizing all of its potentials. The recent stock price disarray, 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 weak basic indicators, AutoZone may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Tuesday Morning and AutoZone

The main advantage of trading using opposite Tuesday Morning and AutoZone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tuesday Morning 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 Tuesday Morning Corp 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.