Correlation Between AutoZone and Williams Sonoma

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

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

Diversification Opportunities for AutoZone and Williams Sonoma

-0.55

Correlation Coefficient

AutoZone  Williams Sonoma

Excellent diversification

The 3 months correlation between AutoZone and Williams is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and Williams Sonoma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Williams Sonoma 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 Williams Sonoma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Williams Sonoma has no effect on the direction of AutoZone i.e., AutoZone and Williams Sonoma go up and down completely randomly.

Pair Corralation between AutoZone and Williams Sonoma

Considering the 90-day investment horizon AutoZone is expected to generate 0.51 times more return on investment than Williams Sonoma. However, AutoZone is 1.95 times less risky than Williams Sonoma. It trades about 0.23 of its potential returns per unit of risk. Williams Sonoma is currently generating about -0.09 per unit of risk. If you would invest  318,571  in AutoZone on December 30, 2024 and sell it today you would earn a total of  58,529  from holding AutoZone or generate 18.37% return on investment over 90 days.

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

AutoZone  vs.  Williams Sonoma

AutoZone

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 17 (%) 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.

Williams Sonoma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Williams Sonoma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators 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 Williams Sonoma

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

The idea behind AutoZone and Williams Sonoma 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.