Correlation Between Zebra Technologies and AAP

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

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

Diversification Opportunities for Zebra Technologies and AAP

-0.49

Correlation Coefficient

Zebra Technologies  AAP

Very good diversification

The 3 months correlation between Zebra and AAP is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Zebra Technologies and AAP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP Inc and Zebra Technologies 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 Zebra Technologies are associated (or correlated) with AAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP Inc has no effect on the direction of Zebra Technologies i.e., Zebra Technologies and AAP go up and down completely randomly.

Pair Corralation between Zebra Technologies and AAP

Given the investment horizon of 90 days Zebra Technologies is expected to generate 0.07 times more return on investment than AAP. However, Zebra Technologies is 14.05 times less risky than AAP. It trades about 0.29 of its potential returns per unit of risk. AAP Inc is currently generating about -0.09 per unit of risk. If you would invest  37,702  in Zebra Technologies on September 5, 2024 and sell it today you would earn a total of  2,938  from holding Zebra Technologies or generate 7.79% return on investment over 90 days.

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

Zebra Technologies  vs.  AAP Inc

Zebra Technologies

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zebra Technologies are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Zebra Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

AAP Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AAP Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AAP revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zebra Technologies and AAP

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

The idea behind Zebra Technologies and AAP Inc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.