Correlation Between AKA Brands and AutoNation

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

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

Diversification Opportunities for AKA Brands and AutoNation

-0.38

Correlation Coefficient

AKA Brands  AutoNation

Very good diversification

The 3 months correlation between AKA and AutoNation is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding AKA Brands Holding and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and AKA 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 AKA Brands Holding 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 AKA Brands i.e., AKA Brands and AutoNation go up and down completely randomly.

Pair Corralation between AKA Brands and AutoNation

Considering the 90-day investment horizon AKA Brands Holding is expected to under-perform the AutoNation. In addition to that, AKA Brands is 2.96 times more volatile than AutoNation. It trades about -0.02 of its total potential returns per unit of risk. AutoNation is currently generating about 0.03 per unit of volatility. If you would invest  16,602  in AutoNation on October 7, 2024 and sell it today you would earn a total of  334.00  from holding AutoNation or generate 2.01% return on investment over 90 days.

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

AKA Brands Holding  vs.  AutoNation

AKA Brands Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AKA Brands Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, AKA Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AutoNation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AutoNation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AutoNation is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AKA Brands and AutoNation

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

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.