Correlation Between AutoNation and Chewy

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

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

Diversification Opportunities for AutoNation and Chewy

0.66

Correlation Coefficient

AutoNation  Chewy

Poor diversification

The 3 months correlation between AutoNation and Chewy is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Chewy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chewy Inc and AutoNation 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 AutoNation are associated (or correlated) with Chewy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chewy Inc has no effect on the direction of AutoNation i.e., AutoNation and Chewy go up and down completely randomly.

Pair Corralation between AutoNation and Chewy

Allowing for the 90-day total investment horizon AutoNation is expected to under-perform the Chewy. But the stock apears to be less risky and, when comparing its historical volatility, AutoNation is 2.44 times less risky than Chewy. The stock trades about -0.08 of its potential returns per unit of risk. The Chewy Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  3,089  in Chewy Inc on October 10, 2024 and sell it today you would earn a total of  488.00  from holding Chewy Inc or generate 15.8% return on investment over 90 days.

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

AutoNation  vs.  Chewy Inc

AutoNation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AutoNation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, AutoNation may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chewy Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chewy Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Chewy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AutoNation and Chewy

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

The idea behind AutoNation and Chewy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.