Correlation Between Pet Acquisition and AutoNation

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

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

Diversification Opportunities for Pet Acquisition and AutoNation

-0.7

Correlation Coefficient

Pet Acquisition  AutoNation

Excellent diversification

The 3 months correlation between Pet and AutoNation is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pet Acquisition LLC and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and Pet Acquisition 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 Pet Acquisition LLC are associated (or correlated) with AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Pet Acquisition i.e., Pet Acquisition and AutoNation go up and down completely randomly.

Pair Corralation between Pet Acquisition and AutoNation

Given the investment horizon of 90 days Pet Acquisition LLC is expected to under-perform the AutoNation. In addition to that, Pet Acquisition is 2.46 times more volatile than AutoNation. It trades about -0.11 of its total potential returns per unit of risk. AutoNation is currently generating about 0.09 per unit of volatility. If you would invest  13,512  in AutoNation on January 31, 2024 and sell it today you would earn a total of  3,031  from holding AutoNation or generate 22.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Pet Acquisition LLC  vs.  AutoNation

Pet Acquisition LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pet Acquisition LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AutoNation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AutoNation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, AutoNation displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pet Acquisition and AutoNation

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

The idea behind Pet Acquisition LLC and AutoNation 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.