Correlation Between AutoZone and Group 1

Can any of the company-specific risk be diversified away by investing in both AutoZone and Group 1 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 Group 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AutoZone and Group 1 Automotive, you can compare the effects of market volatilities on AutoZone and Group 1 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 Group 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoZone and Group 1.

Diversification Opportunities for AutoZone and Group 1

0.73

Correlation Coefficient

AutoZone  Group 1

Poor diversification

The 3 months correlation between AutoZone and Group is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and Group 1 Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group 1 Automotive 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 Group 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group 1 Automotive has no effect on the direction of AutoZone i.e., AutoZone and Group 1 go up and down completely randomly.

Pair Corralation between AutoZone and Group 1

Considering the 90-day investment horizon AutoZone is expected to generate 0.53 times more return on investment than Group 1. However, AutoZone is 1.9 times less risky than Group 1. It trades about 0.11 of its potential returns per unit of risk. Group 1 Automotive is currently generating about -0.08 per unit of risk. If you would invest  343,220  in AutoZone on December 4, 2024 and sell it today you would earn a total of  7,413  from holding AutoZone or generate 2.16% return on investment over 90 days.

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

AutoZone  vs.  Group 1 Automotive

AutoZone

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, AutoZone may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Group 1 Automotive

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Group 1 Automotive are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Group 1 is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with AutoZone and Group 1

The main advantage of trading using opposite AutoZone and Group 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoZone position performs unexpectedly, Group 1 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 Group 1 will offset losses from the drop in Group 1's long position.

The idea behind AutoZone and Group 1 Automotive 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.