Correlation Between AutoNation and Leslies

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

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

Diversification Opportunities for AutoNation and Leslies

-0.4

Correlation Coefficient

AutoNation  Leslies

Very good diversification

The 3 months correlation between AutoNation and Leslies is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Leslies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leslies 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 Leslies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leslies has no effect on the direction of AutoNation i.e., AutoNation and Leslies go up and down completely randomly.

Pair Corralation between AutoNation and Leslies

Allowing for the 90-day total investment horizon AutoNation is expected to generate 0.34 times more return on investment than Leslies. However, AutoNation is 2.97 times less risky than Leslies. It trades about 0.05 of its potential returns per unit of risk. Leslies is currently generating about -0.03 per unit of risk. If you would invest  13,610  in AutoNation on October 3, 2024 and sell it today you would earn a total of  3,262  from holding AutoNation or generate 23.97% return on investment over 90 days.

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

AutoNation  vs.  Leslies

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.

Leslies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leslies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with AutoNation and Leslies

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

The idea behind AutoNation and Leslies 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..