Correlation Between Williams Sonoma and AutoZone

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

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

Diversification Opportunities for Williams Sonoma and AutoZone

-0.22

Correlation Coefficient

Williams Sonoma  AutoZone

Very good diversification

The 3 months correlation between Williams and AutoZone is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Williams Sonoma and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone and Williams Sonoma 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 Williams Sonoma 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 Williams Sonoma i.e., Williams Sonoma and AutoZone go up and down completely randomly.

Pair Corralation between Williams Sonoma and AutoZone

Considering the 90-day investment horizon Williams Sonoma is expected to generate 3.05 times more return on investment than AutoZone. However, Williams Sonoma is 3.05 times more volatile than AutoZone. It trades about 0.12 of its potential returns per unit of risk. AutoZone is currently generating about 0.01 per unit of risk. If you would invest  13,379  in Williams Sonoma on August 30, 2024 and sell it today you would earn a total of  3,760  from holding Williams Sonoma or generate 28.1% return on investment over 90 days.

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

Williams Sonoma  vs.  AutoZone

Williams Sonoma

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Williams Sonoma are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Williams Sonoma displayed solid returns over the last few months and may actually be approaching a breakup point.

AutoZone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AutoZone has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, AutoZone is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Williams Sonoma and AutoZone

The main advantage of trading using opposite Williams Sonoma and AutoZone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Williams Sonoma 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 Williams Sonoma 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.