Correlation Between AutoZone and Chaoda Modern

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

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

Diversification Opportunities for AutoZone and Chaoda Modern

-0.5

Correlation Coefficient

AutoZone  Chaoda Modern

Very good diversification

The 3 months correlation between AutoZone and Chaoda is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and Chaoda Modern Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chaoda Modern Agriculture 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 Chaoda Modern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chaoda Modern Agriculture has no effect on the direction of AutoZone i.e., AutoZone and Chaoda Modern go up and down completely randomly.

Pair Corralation between AutoZone and Chaoda Modern

Assuming the 90 days horizon AutoZone is expected to generate 30.43 times less return on investment than Chaoda Modern. But when comparing it to its historical volatility, AutoZone is 22.06 times less risky than Chaoda Modern. It trades about 0.08 of its potential returns per unit of risk. Chaoda Modern Agriculture is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Chaoda Modern Agriculture on September 29, 2024 and sell it today you would lose (3.00) from holding Chaoda Modern Agriculture or give up 60.0% of portfolio value over 90 days.

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

AutoZone  vs.  Chaoda Modern Agriculture

AutoZone

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 7 (%) 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 January 2025.

Chaoda Modern Agriculture

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chaoda Modern Agriculture are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Chaoda Modern reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AutoZone and Chaoda Modern

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

The idea behind AutoZone and Chaoda Modern Agriculture 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.