Correlation Between EBay and AutoZone

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

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

Diversification Opportunities for EBay and AutoZone

0.86

Correlation Coefficient

EBay  AutoZone

Very poor diversification

The 3 months correlation between EBay and AutoZone is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone and EBay 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 eBay Inc 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 EBay i.e., EBay and AutoZone go up and down completely randomly.

Pair Corralation between EBay and AutoZone

Given the investment horizon of 90 days eBay Inc is expected to generate 1.04 times more return on investment than AutoZone. However, EBay is 1.04 times more volatile than AutoZone. It trades about -0.05 of its potential returns per unit of risk. AutoZone is currently generating about -0.3 per unit of risk. If you would invest  5,227  in eBay Inc on February 1, 2024 and sell it today you would lose (73.00) from holding eBay Inc or give up 1.4% of portfolio value over 90 days.

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

eBay Inc  vs.  AutoZone

eBay Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, EBay showed solid returns over the last few months and may actually be approaching a breakup point.

AutoZone

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AutoZone is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with EBay and AutoZone

The main advantage of trading using opposite EBay and AutoZone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay 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 eBay Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.