Correlation Between AutoZone and BANNER

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

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

Diversification Opportunities for AutoZone and BANNER

0.74

Correlation Coefficient

AutoZone  BANNER

Poor diversification

The 3 months correlation between AutoZone and BANNER is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and BANNER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANNER 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 BANNER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANNER has no effect on the direction of AutoZone i.e., AutoZone and BANNER go up and down completely randomly.

Pair Corralation between AutoZone and BANNER

Assuming the 90 days horizon AutoZone is expected to generate 0.53 times more return on investment than BANNER. However, AutoZone is 1.88 times less risky than BANNER. It trades about 0.21 of its potential returns per unit of risk. BANNER is currently generating about -0.42 per unit of risk. If you would invest  300,600  in AutoZone on September 27, 2024 and sell it today you would earn a total of  10,800  from holding AutoZone or generate 3.59% return on investment over 90 days.

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

AutoZone  vs.  BANNER

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.

BANNER

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BANNER are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, BANNER exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AutoZone and BANNER

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

The idea behind AutoZone and BANNER 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..