Correlation Between Advance Auto and Envela Corp

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Can any of the company-specific risk be diversified away by investing in both Advance Auto and Envela Corp 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 Envela Corp 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 Envela Corp, you can compare the effects of market volatilities on Advance Auto and Envela Corp 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 Envela Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Envela Corp.

Diversification Opportunities for Advance Auto and Envela Corp

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Advance and Envela is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Envela Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Envela Corp 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 Envela Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Envela Corp has no effect on the direction of Advance Auto i.e., Advance Auto and Envela Corp go up and down completely randomly.

Pair Corralation between Advance Auto and Envela Corp

Considering the 90-day investment horizon Advance Auto is expected to generate 57.49 times less return on investment than Envela Corp. But when comparing it to its historical volatility, Advance Auto Parts is 1.52 times less risky than Envela Corp. It trades about 0.0 of its potential returns per unit of risk. Envela Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  436.00  in Envela Corp on May 10, 2022 and sell it today you would earn a total of  350.00  from holding Envela Corp or generate 80.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Advance Auto Parts  vs.  Envela Corp

 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

Envela Corp 
Envela Performance
15 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Envela Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, Envela Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Envela Price Channel

Advance Auto and Envela Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Advance Auto and Envela Corp

The main advantage of trading using opposite Advance Auto and Envela Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Envela Corp 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 Envela Corp will offset losses from the drop in Envela Corp's long position.
The idea behind Advance Auto Parts and Envela Corp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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