Correlation Between OReilly Automotive and Advance Auto

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

By analyzing existing cross correlation between OReilly Automotive and Advance Auto Parts, you can compare the effects of market volatilities on OReilly Automotive and Advance Auto 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 OReilly Automotive with a short position of Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of OReilly Automotive and Advance Auto.

Diversification Opportunities for OReilly Automotive and Advance Auto

0.11

Correlation Coefficient

OReilly Automotive  Advance Auto

Average diversification

The 3 months correlation between OReilly and Advance is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding OReilly Automotive and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts and OReilly Automotive 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 OReilly Automotive are associated (or correlated) with Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of OReilly Automotive i.e., OReilly Automotive and Advance Auto go up and down completely randomly.

Pair Corralation between OReilly Automotive and Advance Auto

Assuming the 90 days trading horizon OReilly Automotive is expected to generate 41.65 times more return on investment than Advance Auto. However, OReilly Automotive is 41.65 times more volatile than Advance Auto Parts. It trades about 0.25 of its potential returns per unit of risk. Advance Auto Parts is currently generating about 0.04 per unit of risk. If you would invest  2,371  in OReilly Automotive on April 9, 2025 and sell it today you would lose (2,208) from holding OReilly Automotive or give up 93.13% of portfolio value over 90 days.

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

OReilly Automotive  vs.  Advance Auto Parts

OReilly Automotive

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, OReilly Automotive sustained solid returns over the last few months and may actually be approaching a breakup point.

Advance Auto Parts

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advance Auto Parts are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Advance Auto sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OReilly Automotive and Advance Auto

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

The idea behind OReilly Automotive and Advance Auto Parts 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.