Correlation Between RETAIL FOOD and OReilly Automotive

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Can any of the company-specific risk be diversified away by investing in both RETAIL FOOD and OReilly Automotive 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 RETAIL FOOD and OReilly Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RETAIL FOOD GROUP and OReilly Automotive, you can compare the effects of market volatilities on RETAIL FOOD and OReilly Automotive 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 RETAIL FOOD with a short position of OReilly Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and OReilly Automotive.

Diversification Opportunities for RETAIL FOOD and OReilly Automotive

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between RETAIL and OReilly is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and OReilly Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OReilly Automotive and RETAIL FOOD 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 RETAIL FOOD GROUP are associated (or correlated) with OReilly Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OReilly Automotive has no effect on the direction of RETAIL FOOD i.e., RETAIL FOOD and OReilly Automotive go up and down completely randomly.

Pair Corralation between RETAIL FOOD and OReilly Automotive

Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to under-perform the OReilly Automotive. In addition to that, RETAIL FOOD is 4.52 times more volatile than OReilly Automotive. It trades about -0.33 of its total potential returns per unit of risk. OReilly Automotive is currently generating about 0.14 per unit of volatility. If you would invest  115,500  in OReilly Automotive on October 22, 2024 and sell it today you would earn a total of  1,300  from holding OReilly Automotive or generate 1.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

RETAIL FOOD GROUP  vs.  OReilly Automotive

 Performance 
       Timeline  
RETAIL FOOD GROUP 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days RETAIL FOOD GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
OReilly Automotive 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, OReilly Automotive is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

RETAIL FOOD and OReilly Automotive Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with RETAIL FOOD and OReilly Automotive

The main advantage of trading using opposite RETAIL FOOD and OReilly Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RETAIL FOOD position performs unexpectedly, OReilly Automotive 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 OReilly Automotive will offset losses from the drop in OReilly Automotive's long position.
The idea behind RETAIL FOOD GROUP and OReilly Automotive 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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