Correlation Between Advance Auto and Marinemax

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

Diversification Opportunities for Advance Auto and Marinemax

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Advance and Marinemax is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Marinemax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marinemax 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 Marinemax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marinemax has no effect on the direction of Advance Auto i.e., Advance Auto and Marinemax go up and down completely randomly.

Pair Corralation between Advance Auto and Marinemax

Considering the 90-day investment horizon Advance Auto Parts is expected to generate 0.63 times more return on investment than Marinemax. However, Advance Auto Parts is 1.59 times less risky than Marinemax. It trades about 0.23 of its potential returns per unit of risk. Marinemax is currently generating about 0.14 per unit of risk. If you would invest  18,601  in Advance Auto Parts on May 15, 2022 and sell it today you would earn a total of  1,652  from holding Advance Auto Parts or generate 8.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Advance Auto Parts  vs.  Marinemax

 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 recent stock price disarray, may contribute to short-term losses for the insiders.

Advance Price Channel

Marinemax 
Marinemax Performance
0 of 100
Over the last 90 days Marinemax has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Marinemax is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Marinemax Price Channel

Advance Auto and Marinemax Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Advance Auto and Marinemax

The main advantage of trading using opposite Advance Auto and Marinemax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Marinemax 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 Marinemax will offset losses from the drop in Marinemax's long position.
The idea behind Advance Auto Parts and Marinemax 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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