Correlation Between Caseys General and Auto Trader

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

By analyzing existing cross correlation between Caseys General Stores and Auto Trader Group, you can compare the effects of market volatilities on Caseys General and Auto Trader 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 Caseys General with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caseys General and Auto Trader.

Diversification Opportunities for Caseys General and Auto Trader

-0.57

Correlation Coefficient

Caseys General  Auto Trader

Excellent diversification

The 3 months correlation between Caseys and Auto is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Caseys General 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 Caseys General Stores are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Caseys General i.e., Caseys General and Auto Trader go up and down completely randomly.

Pair Corralation between Caseys General and Auto Trader

Assuming the 90 days trading horizon Caseys General Stores is expected to generate 1.09 times more return on investment than Auto Trader. However, Caseys General is 1.09 times more volatile than Auto Trader Group. It trades about 0.11 of its potential returns per unit of risk. Auto Trader Group is currently generating about 0.09 per unit of risk. If you would invest  28,479  in Caseys General Stores on September 8, 2024 and sell it today you would earn a total of  10,921  from holding Caseys General Stores or generate 38.35% return on investment over 90 days.

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

Caseys General Stores  vs.  Auto Trader Group

Caseys General Stores

Risk-Adjusted Performance

13 of 100

Good

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

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Auto Trader is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Caseys General and Auto Trader

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

The idea behind Caseys General Stores and Auto Trader Group 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.