Correlation Between AutoZone and PETCO HEALTH

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

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

Diversification Opportunities for AutoZone and PETCO HEALTH

0.71

Correlation Coefficient

AutoZone  PETCO HEALTH

Poor diversification

The 3 months correlation between AutoZone and PETCO is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and PETCO HEALTH CLA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PETCO HEALTH CLA and AutoZone 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 AutoZone are associated (or correlated) with PETCO HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PETCO HEALTH CLA has no effect on the direction of AutoZone i.e., AutoZone and PETCO HEALTH go up and down completely randomly.

Pair Corralation between AutoZone and PETCO HEALTH

Assuming the 90 days horizon AutoZone is expected to generate 21.59 times less return on investment than PETCO HEALTH. But when comparing it to its historical volatility, AutoZone is 4.32 times less risky than PETCO HEALTH. It trades about 0.02 of its potential returns per unit of risk. PETCO HEALTH CLA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  266.00  in PETCO HEALTH CLA on April 25, 2025 and sell it today you would earn a total of  85.00  from holding PETCO HEALTH CLA or generate 31.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

AutoZone  vs.  PETCO HEALTH CLA

AutoZone

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AutoZone is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

PETCO HEALTH CLA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PETCO HEALTH CLA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PETCO HEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AutoZone and PETCO HEALTH

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

The idea behind AutoZone and PETCO HEALTH CLA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.