Correlation Between AutoZone and Event Hospitality

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

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

Diversification Opportunities for AutoZone and Event Hospitality

0.83

Correlation Coefficient

AutoZone  Event Hospitality

Very poor diversification

The 3 months correlation between AutoZone and Event is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and Event Hospitality and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Event Hospitality 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 Event Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Event Hospitality has no effect on the direction of AutoZone i.e., AutoZone and Event Hospitality go up and down completely randomly.

Pair Corralation between AutoZone and Event Hospitality

Assuming the 90 days horizon AutoZone is expected to generate 0.62 times more return on investment than Event Hospitality. However, AutoZone is 1.6 times less risky than Event Hospitality. It trades about 0.32 of its potential returns per unit of risk. Event Hospitality and is currently generating about -0.08 per unit of risk. If you would invest  292,700  in AutoZone on September 22, 2024 and sell it today you would earn a total of  18,500  from holding AutoZone or generate 6.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

AutoZone  vs.  Event Hospitality and

AutoZone

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AutoZone reported solid returns over the last few months and may actually be approaching a breakup point.

Event Hospitality

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Event Hospitality and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Event Hospitality is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AutoZone and Event Hospitality

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

The idea behind AutoZone and Event Hospitality and 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.