Correlation Between Advance Auto and Dicks Sporting
Can any of the company-specific risk be diversified away by investing in both Advance Auto and Dicks Sporting 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 Advance Auto and Dicks Sporting into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advance Auto Parts and Dicks Sporting Goods, you can compare the effects of market volatilities on Advance Auto and Dicks Sporting 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 Advance Auto with a short position of Dicks Sporting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Dicks Sporting.
Diversification Opportunities for Advance Auto and Dicks Sporting
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Advance and Dicks is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Dicks Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dicks Sporting Goods and Advance Auto 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 Advance Auto Parts are associated (or correlated) with Dicks Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dicks Sporting Goods has no effect on the direction of Advance Auto i.e., Advance Auto and Dicks Sporting go up and down completely randomly.
Pair Corralation between Advance Auto and Dicks Sporting
Considering the 90-day investment horizon Advance Auto Parts is expected to generate 0.5 times more return on investment than Dicks Sporting. However, Advance Auto Parts is 2.0 times less risky than Dicks Sporting. It trades about 0.73 of its potential returns per unit of risk. Dicks Sporting Goods is currently generating about 0.31 per unit of risk. If you would invest 6,475 in Advance Auto Parts on December 29, 2023 and sell it today you would earn a total of 2,057 from holding Advance Auto Parts or generate 31.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Advance Auto Parts vs. Dicks Sporting Goods
Performance |
Timeline |
Advance Auto Parts |
Dicks Sporting Goods |
Advance Auto and Dicks Sporting Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Advance Auto and Dicks Sporting
The main advantage of trading using opposite Advance Auto and Dicks Sporting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Dicks Sporting 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 Dicks Sporting will offset losses from the drop in Dicks Sporting's long position.Advance Auto vs. Macys Inc | Advance Auto vs. Wayfair | Advance Auto vs. 1StdibsCom | Advance Auto vs. Boqii Holding Limited |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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