Correlation Between Auto Trader and Caseys General

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Can any of the company-specific risk be diversified away by investing in both Auto Trader and Caseys General 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 Auto Trader and Caseys General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Caseys General Stores, you can compare the effects of market volatilities on Auto Trader and Caseys General 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 Auto Trader with a short position of Caseys General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Caseys General.

Diversification Opportunities for Auto Trader and Caseys General

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Auto and Caseys is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Caseys General Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caseys General Stores and Auto Trader 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 Auto Trader Group are associated (or correlated) with Caseys General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caseys General Stores has no effect on the direction of Auto Trader i.e., Auto Trader and Caseys General go up and down completely randomly.

Pair Corralation between Auto Trader and Caseys General

Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the Caseys General. But the stock apears to be less risky and, when comparing its historical volatility, Auto Trader Group is 1.16 times less risky than Caseys General. The stock trades about -0.01 of its potential returns per unit of risk. The Caseys General Stores is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  33,753  in Caseys General Stores on September 6, 2024 and sell it today you would earn a total of  5,647  from holding Caseys General Stores or generate 16.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.46%
ValuesDaily Returns

Auto Trader Group  vs.  Caseys General Stores

 Performance 
       Timeline  
Auto Trader Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Auto Trader is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Caseys General Stores 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Caseys General Stores are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caseys General unveiled solid returns over the last few months and may actually be approaching a breakup point.

Auto Trader and Caseys General Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Auto Trader and Caseys General

The main advantage of trading using opposite Auto Trader and Caseys General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Caseys General 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 Caseys General will offset losses from the drop in Caseys General's long position.
The idea behind Auto Trader Group and Caseys General Stores 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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