Correlation Between Advance Auto and Funko

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

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

Diversification Opportunities for Advance Auto and Funko

-0.37

Correlation Coefficient

Advance Auto  Funko

Very good diversification

The 3 months correlation between Advance and Funko is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Funko Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Funko Inc and Advance Auto 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 Advance Auto Parts are associated (or correlated) with Funko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Funko Inc has no effect on the direction of Advance Auto i.e., Advance Auto and Funko go up and down completely randomly.

Pair Corralation between Advance Auto and Funko

Considering the 90-day investment horizon Advance Auto is expected to generate 7.42 times less return on investment than Funko. In addition to that, Advance Auto is 1.0 times more volatile than Funko Inc. It trades about 0.01 of its total potential returns per unit of risk. Funko Inc is currently generating about 0.06 per unit of volatility. If you would invest  1,047  in Funko Inc on August 30, 2024 and sell it today you would earn a total of  102.00  from holding Funko Inc or generate 9.74% return on investment over 90 days.

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

Advance Auto Parts  vs.  Funko Inc

Advance Auto Parts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advance Auto Parts has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Advance Auto is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Funko Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Funko Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward-looking signals, Funko may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Advance Auto and Funko

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

The idea behind Advance Auto Parts and Funko Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.