Correlation Between Advance Auto and Best Buy

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Advance Auto and Best Buy 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 Advance Auto and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advance Auto Parts and Best Buy Company, you can compare the effects of market volatilities on Advance Auto and Best Buy 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 Advance Auto with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Best Buy.

Diversification Opportunities for Advance Auto and Best Buy

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Advance and Best Buy is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Best Buy Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Advance Auto 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 Advance Auto Parts are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Advance Auto i.e., Advance Auto and Best Buy go up and down completely randomly.

Pair Corralation between Advance Auto and Best Buy

Considering the 90-day investment horizon Advance Auto Parts is expected to generate 0.75 times more return on investment than Best Buy. However, Advance Auto Parts is 1.33 times less risky than Best Buy. It trades about 0.04 of its potential returns per unit of risk. Best Buy Company is currently generating about -0.01 per unit of risk. If you would invest  15,207  in Advance Auto Parts on May 12, 2022 and sell it today you would earn a total of  3,970  from holding Advance Auto Parts or generate 26.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Advance Auto Parts  vs.  Best Buy Company

 Performance (%) 
       Timeline  
Advance Auto Parts 
Advance Performance
0 of 100
Over the last 90 days Advance Auto Parts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Advance Auto is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

Advance Price Channel

Best Buy 
Best Buy Performance
0 of 100
Over the last 90 days Best Buy Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Best Buy Price Channel

Advance Auto and Best Buy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Advance Auto and Best Buy

The main advantage of trading using opposite Advance Auto and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.
The idea behind Advance Auto Parts and Best Buy Company 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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

Other Complementary Tools

Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Go
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Go
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Go
Watchlist Optimization
Optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Go
Equity Valuation
Check real value of public entities based on technical and fundamental data
Go
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Go
Crypto Correlations
Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Go
Probability Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Go
Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go