Correlation Between Genuine Parts and AutoZone

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

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

Diversification Opportunities for Genuine Parts and AutoZone

0.71

Correlation Coefficient

Genuine Parts  AutoZone

Poor diversification

The 3 months correlation between Genuine and AutoZone is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone and Genuine Parts 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 Genuine Parts Co 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 Genuine Parts i.e., Genuine Parts and AutoZone go up and down completely randomly.

Pair Corralation between Genuine Parts and AutoZone

Considering the 90-day investment horizon Genuine Parts is expected to generate 3.46 times less return on investment than AutoZone. In addition to that, Genuine Parts is 1.17 times more volatile than AutoZone. It trades about 0.06 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 29, 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Genuine Parts Co  vs.  AutoZone

Genuine Parts

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Genuine Parts is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

AutoZone

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 19 (%) 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 Genuine Parts and AutoZone

The main advantage of trading using opposite Genuine Parts and AutoZone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts 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 Genuine Parts Co 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..