Correlation Between AutoNation and Gap,

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

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

Diversification Opportunities for AutoNation and Gap,

0.48

Correlation Coefficient

AutoNation  Gap,

Very weak diversification

The 3 months correlation between AutoNation and Gap, is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of AutoNation i.e., AutoNation and Gap, go up and down completely randomly.

Pair Corralation between AutoNation and Gap,

Allowing for the 90-day total investment horizon AutoNation is expected to generate 0.58 times more return on investment than Gap,. However, AutoNation is 1.72 times less risky than Gap,. It trades about -0.04 of its potential returns per unit of risk. The Gap, is currently generating about -0.05 per unit of risk. If you would invest  17,246  in AutoNation on September 23, 2024 and sell it today you would lose (227.00) from holding AutoNation or give up 1.32% of portfolio value over 90 days.

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

AutoNation  vs.  The Gap,

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.

Gap,

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AutoNation and Gap,

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

The idea behind AutoNation and The Gap, 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.