Correlation Between AutoZone and Childrens Place

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

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

Diversification Opportunities for AutoZone and Childrens Place

-0.22

Correlation Coefficient

AutoZone  Childrens Place

Very good diversification

The 3 months correlation between AutoZone and Childrens is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and Childrens Place in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Childrens Place 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 Childrens Place. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Childrens Place has no effect on the direction of AutoZone i.e., AutoZone and Childrens Place go up and down completely randomly.

Pair Corralation between AutoZone and Childrens Place

Considering the 90-day investment horizon AutoZone is expected to generate 107.11 times less return on investment than Childrens Place. But when comparing it to its historical volatility, AutoZone is 10.96 times less risky than Childrens Place. It trades about 0.02 of its potential returns per unit of risk. Childrens Place is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  544.00  in Childrens Place on September 1, 2024 and sell it today you would earn a total of  1,048  from holding Childrens Place or generate 192.65% return on investment over 90 days.

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

AutoZone  vs.  Childrens Place

AutoZone

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AutoZone is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Childrens Place

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Childrens Place are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Childrens Place exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AutoZone and Childrens Place

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

The idea behind AutoZone and Childrens Place 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.