Correlation Between AutoZone and Superior Plus

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

By analyzing existing cross correlation between AutoZone and Superior Plus Corp, you can compare the effects of market volatilities on AutoZone and Superior Plus 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 AutoZone with a short position of Superior Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoZone and Superior Plus.

Diversification Opportunities for AutoZone and Superior Plus

-0.02

Correlation Coefficient

AutoZone  Superior Plus

Good diversification

The 3 months correlation between AutoZone and Superior is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and Superior Plus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Plus Corp and AutoZone 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 AutoZone are associated (or correlated) with Superior Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Plus Corp has no effect on the direction of AutoZone i.e., AutoZone and Superior Plus go up and down completely randomly.

Pair Corralation between AutoZone and Superior Plus

Assuming the 90 days horizon AutoZone is expected to generate 0.63 times more return on investment than Superior Plus. However, AutoZone is 1.59 times less risky than Superior Plus. It trades about 0.15 of its potential returns per unit of risk. Superior Plus Corp is currently generating about 0.03 per unit of risk. If you would invest  308,500  in AutoZone on December 30, 2024 and sell it today you would earn a total of  37,800  from holding AutoZone or generate 12.25% return on investment over 90 days.

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

AutoZone  vs.  Superior Plus Corp

AutoZone

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AutoZone may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Superior Plus Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Superior Plus Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Superior Plus is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AutoZone and Superior Plus

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

The idea behind AutoZone and Superior Plus 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.