Correlation Between AutoNation and Warby Parker

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

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

Diversification Opportunities for AutoNation and Warby Parker

0.33

Correlation Coefficient

AutoNation  Warby Parker

Weak diversification

The 3 months correlation between AutoNation and Warby is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Warby Parker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warby Parker 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 Warby Parker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warby Parker has no effect on the direction of AutoNation i.e., AutoNation and Warby Parker go up and down completely randomly.

Pair Corralation between AutoNation and Warby Parker

Allowing for the 90-day total investment horizon AutoNation is expected to under-perform the Warby Parker. But the stock apears to be less risky and, when comparing its historical volatility, AutoNation is 2.35 times less risky than Warby Parker. The stock trades about -0.15 of its potential returns per unit of risk. The Warby Parker is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,415  in Warby Parker on September 27, 2024 and sell it today you would earn a total of  157.00  from holding Warby Parker or generate 6.5% return on investment over 90 days.

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

AutoNation  vs.  Warby Parker

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.

Warby Parker

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Warby Parker are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Warby Parker showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AutoNation and Warby Parker

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

The idea behind AutoNation and Warby Parker 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.