Correlation Between Advance Auto and Kirklands

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

Diversification Opportunities for Advance Auto and Kirklands

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Advance and Kirklands is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Kirklands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kirklands 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 Kirklands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kirklands has no effect on the direction of Advance Auto i.e., Advance Auto and Kirklands go up and down completely randomly.

Pair Corralation between Advance Auto and Kirklands

Considering the 90-day investment horizon Advance Auto Parts is expected to under-perform the Kirklands. But the stock apears to be less risky and, when comparing its historical volatility, Advance Auto Parts is 1.07 times less risky than Kirklands. The stock trades about -0.21 of its potential returns per unit of risk. The Kirklands is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  374.00  in Kirklands on September 4, 2022 and sell it today you would earn a total of  10.00  from holding Kirklands or generate 2.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Advance Auto Parts  vs.  Kirklands

 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 latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm insiders.

Advance Price Channel

Kirklands 
Kirklands Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Kirklands are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Kirklands may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Kirklands Price Channel

Advance Auto and Kirklands Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Advance Auto and Kirklands

The main advantage of trading using opposite Advance Auto and Kirklands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Kirklands 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 Kirklands will offset losses from the drop in Kirklands' long position.
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The idea behind Advance Auto Parts and Kirklands 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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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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