Correlation Between AutoNation and Envela Corp

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

By analyzing existing cross correlation between AutoNation and Envela Corp, you can compare the effects of market volatilities on AutoNation and Envela Corp 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 Envela Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and Envela Corp.

Diversification Opportunities for AutoNation and Envela Corp

0.47

Correlation Coefficient

AutoNation  Envela Corp

Very weak diversification

The 3 months correlation between AutoNation and Envela is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Envela Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Envela Corp 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 Envela Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Envela Corp has no effect on the direction of AutoNation i.e., AutoNation and Envela Corp go up and down completely randomly.

Pair Corralation between AutoNation and Envela Corp

Allowing for the 90-day total investment horizon AutoNation is expected to generate 0.71 times more return on investment than Envela Corp. However, AutoNation is 1.41 times less risky than Envela Corp. It trades about 0.05 of its potential returns per unit of risk. Envela Corp is currently generating about 0.03 per unit of risk. If you would invest  11,049  in AutoNation on September 28, 2024 and sell it today you would earn a total of  6,335  from holding AutoNation or generate 57.34% return on investment over 90 days.

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

AutoNation  vs.  Envela Corp

AutoNation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AutoNation has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Envela Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Envela Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Envela Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AutoNation and Envela Corp

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

The idea behind AutoNation and Envela Corp 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 CEOs Directory module to screen CEOs from public companies around the world.