Correlation Between AutoZone and East Japan

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

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

Diversification Opportunities for AutoZone and East Japan

-0.66

Correlation Coefficient

AutoZone  East Japan

Excellent diversification

The 3 months correlation between AutoZone and East is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and East Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Japan Railway 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 East Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Japan Railway has no effect on the direction of AutoZone i.e., AutoZone and East Japan go up and down completely randomly.

Pair Corralation between AutoZone and East Japan

If you would invest  1,749  in East Japan Railway on October 10, 2024 and sell it today you would lose (93.00) from holding East Japan Railway or give up 5.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.0%
Values	Daily Returns

AutoZone  vs.  East Japan Railway

AutoZone

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days AutoZone has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, AutoZone may actually be approaching a critical reversion point that can send shares even higher in February 2025.

East Japan Railway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Japan Railway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AutoZone and East Japan

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

The idea behind AutoZone and East Japan Railway 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.