Correlation Between AutoZone and Arko Corp

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

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

Diversification Opportunities for AutoZone and Arko Corp

-0.67

Correlation Coefficient

AutoZone  Arko Corp

Excellent diversification

The 3 months correlation between AutoZone and Arko is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and Arko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arko 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 Arko Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arko Corp has no effect on the direction of AutoZone i.e., AutoZone and Arko Corp go up and down completely randomly.

Pair Corralation between AutoZone and Arko Corp

Considering the 90-day investment horizon AutoZone is expected to generate 0.21 times more return on investment than Arko Corp. However, AutoZone is 4.77 times less risky than Arko Corp. It trades about 0.18 of its potential returns per unit of risk. Arko Corp is currently generating about -0.1 per unit of risk. If you would invest  324,125  in AutoZone on December 25, 2024 and sell it today you would earn a total of  41,657  from holding AutoZone or generate 12.85% return on investment over 90 days.

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

AutoZone  vs.  Arko Corp

AutoZone

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, AutoZone displayed solid returns over the last few months and may actually be approaching a breakup point.

Arko Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arko Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with AutoZone and Arko Corp

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

The idea behind AutoZone and Arko 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.