Correlation Between Big 5 and AutoZone

Can any of the company-specific risk be diversified away by investing in both Big 5 and AutoZone 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 Big 5 and AutoZone into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big 5 Sporting and AutoZone, you can compare the effects of market volatilities on Big 5 and AutoZone 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 Big 5 with a short position of AutoZone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and AutoZone.

Diversification Opportunities for Big 5 and AutoZone

-0.91

Correlation Coefficient

Big 5  AutoZone

Pay attention - limited upside

The 3 months correlation between Big and AutoZone is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone and Big 5 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 Big 5 Sporting are associated (or correlated) with AutoZone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoZone has no effect on the direction of Big 5 i.e., Big 5 and AutoZone go up and down completely randomly.

Pair Corralation between Big 5 and AutoZone

Given the investment horizon of 90 days Big 5 Sporting is expected to under-perform the AutoZone. In addition to that, Big 5 is 2.32 times more volatile than AutoZone. It trades about -0.3 of its total potential returns per unit of risk. AutoZone is currently generating about 0.25 per unit of volatility. If you would invest  318,571  in AutoZone on December 28, 2024 and sell it today you would earn a total of  64,240  from holding AutoZone or generate 20.17% return on investment over 90 days.

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

Big 5 Sporting  vs.  AutoZone

Big 5 Sporting

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

AutoZone

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 20 (%) 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.

Pair Trading with Big 5 and AutoZone

The main advantage of trading using opposite Big 5 and AutoZone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, AutoZone 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 AutoZone will offset losses from the drop in AutoZone's long position.

The idea behind Big 5 Sporting and AutoZone 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.