Correlation Between Xcel Brands and AutoZone

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

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

Diversification Opportunities for Xcel Brands and AutoZone

-0.56

Correlation Coefficient

Xcel Brands  AutoZone

Excellent diversification

The 3 months correlation between Xcel and AutoZone is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Brands and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone and Xcel Brands 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 Xcel Brands 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 Xcel Brands i.e., Xcel Brands and AutoZone go up and down completely randomly.

Pair Corralation between Xcel Brands and AutoZone

Given the investment horizon of 90 days Xcel Brands is expected to under-perform the AutoZone. In addition to that, Xcel Brands is 3.45 times more volatile than AutoZone. It trades about -0.24 of its total potential returns per unit of risk. AutoZone is currently generating about -0.3 per unit of volatility. If you would invest  316,860  in AutoZone on February 1, 2024 and sell it today you would lose (21,220) from holding AutoZone or give up 6.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Xcel Brands  vs.  AutoZone

Xcel Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xcel Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Xcel Brands and AutoZone

The main advantage of trading using opposite Xcel Brands and AutoZone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xcel Brands 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 Xcel Brands 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.