Correlation Between Advance Auto and Childrens Place
Can any of the company-specific risk be diversified away by investing in both Advance Auto and Childrens Place 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 Childrens Place 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 Childrens Place, you can compare the effects of market volatilities on Advance Auto and Childrens Place 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 Childrens Place. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Childrens Place.
Diversification Opportunities for Advance Auto and Childrens Place
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Advance and Childrens is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Childrens Place in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Childrens Place 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 Childrens Place. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Childrens Place has no effect on the direction of Advance Auto i.e., Advance Auto and Childrens Place go up and down completely randomly.
Pair Corralation between Advance Auto and Childrens Place
Considering the 90-day investment horizon Advance Auto Parts is expected to under-perform the Childrens Place. But the stock apears to be less risky and, when comparing its historical volatility, Advance Auto Parts is 4.57 times less risky than Childrens Place. The stock trades about -0.01 of its potential returns per unit of risk. The Childrens Place is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 544.00 in Childrens Place on September 1, 2024 and sell it today you would earn a total of 1,048 from holding Childrens Place or generate 192.65% 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. Childrens Place
Performance |
Timeline |
Advance Auto Parts |
Childrens Place |
Advance Auto and Childrens Place Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Advance Auto and Childrens Place
The main advantage of trading using opposite Advance Auto and Childrens Place positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Childrens Place 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 Childrens Place will offset losses from the drop in Childrens Place's long position.Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
Childrens Place vs. Ross Stores | Childrens Place vs. Buckle Inc | Childrens Place vs. Guess Inc | Childrens Place vs. Abercrombie Fitch |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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