Correlation Between Rayonier Advanced and AutoNation

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

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

Diversification Opportunities for Rayonier Advanced and AutoNation

-0.07

Correlation Coefficient

Rayonier Advanced  AutoNation

Good diversification

The 3 months correlation between Rayonier and AutoNation is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier Advanced Materials and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and Rayonier Advanced 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 Rayonier Advanced Materials are associated (or correlated) with AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Rayonier Advanced i.e., Rayonier Advanced and AutoNation go up and down completely randomly.

Pair Corralation between Rayonier Advanced and AutoNation

Assuming the 90 days horizon Rayonier Advanced is expected to generate 2.18 times less return on investment than AutoNation. In addition to that, Rayonier Advanced is 3.05 times more volatile than AutoNation. It trades about 0.06 of its total potential returns per unit of risk. AutoNation is currently generating about 0.4 per unit of volatility. If you would invest  16,350  in AutoNation on October 22, 2024 and sell it today you would earn a total of  1,435  from holding AutoNation or generate 8.78% return on investment over 90 days.

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

Rayonier Advanced Materials  vs.  AutoNation

Rayonier Advanced

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rayonier Advanced Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Rayonier Advanced reported solid returns over the last few months and may actually be approaching a breakup point.

AutoNation

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AutoNation are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AutoNation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rayonier Advanced and AutoNation

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

The idea behind Rayonier Advanced Materials and AutoNation 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.