Correlation Between Advance Auto and Target
Can any of the company-specific risk be diversified away by investing in both Advance Auto and Target 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 Target 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 Target, you can compare the effects of market volatilities on Advance Auto and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Target.
Diversification Opportunities for Advance Auto and Target
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Advance and Target is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Advance Auto i.e., Advance Auto and Target go up and down completely randomly.
Pair Corralation between Advance Auto and Target
Considering the 90-day investment horizon Advance Auto Parts is expected to under-perform the Target. In addition to that, Advance Auto is 1.68 times more volatile than Target. It trades about -0.04 of its total potential returns per unit of risk. Target is currently generating about 0.03 per unit of volatility. If you would invest 15,142 in Target on January 31, 2024 and sell it today you would earn a total of 1,231 from holding Target or generate 8.13% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Advance Auto Parts vs. Target
Performance |
Timeline |
Advance Auto Parts |
Target |
Advance Auto and Target Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Advance Auto and Target
The main advantage of trading using opposite Advance Auto and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
Target vs. Costco Wholesale Corp | Target vs. BJs Wholesale Club | Target vs. Dollar Tree | Target vs. Dollar General |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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