Correlation Between AutoNation and Raytech Holding

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

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

Diversification Opportunities for AutoNation and Raytech Holding

-0.03

Correlation Coefficient

AutoNation  Raytech Holding

Good diversification

The 3 months correlation between AutoNation and Raytech is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Raytech Holding Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytech Holding 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 Raytech Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytech Holding has no effect on the direction of AutoNation i.e., AutoNation and Raytech Holding go up and down completely randomly.

Pair Corralation between AutoNation and Raytech Holding

Allowing for the 90-day total investment horizon AutoNation is expected to under-perform the Raytech Holding. But the stock apears to be less risky and, when comparing its historical volatility, AutoNation is 12.02 times less risky than Raytech Holding. The stock trades about -0.19 of its potential returns per unit of risk. The Raytech Holding Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  141.00  in Raytech Holding Limited on September 29, 2024 and sell it today you would earn a total of  3.00  from holding Raytech Holding Limited or generate 2.13% return on investment over 90 days.

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

AutoNation  vs.  Raytech Holding Limited

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.

Raytech Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytech Holding Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with AutoNation and Raytech Holding

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

The idea behind AutoNation and Raytech Holding Limited 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.