Correlation Between Envela Corp and Advance Auto

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

Diversification Opportunities for Envela Corp and Advance Auto

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between Envela and Advance is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Envela Corp and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts and Envela Corp 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 Envela Corp are associated (or correlated) with Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of Envela Corp i.e., Envela Corp and Advance Auto go up and down completely randomly.

Pair Corralation between Envela Corp and Advance Auto

Considering the 90-day investment horizon Envela Corp is expected to generate 2.75 times more return on investment than Advance Auto. However, Envela Corp is 2.75 times more volatile than Advance Auto Parts. It trades about 0.11 of its potential returns per unit of risk. Advance Auto Parts is currently generating about 0.2 per unit of risk. If you would invest  736.00  in Envela Corp on May 16, 2022 and sell it today you would earn a total of  69.00  from holding Envela Corp or generate 9.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Envela Corp  vs.  Advance Auto Parts

 Performance (%) 
       Timeline  
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 weak 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 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

Envela Corp and Advance Auto Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Envela Corp and Advance Auto

The main advantage of trading using opposite Envela Corp and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Envela Corp position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.
The idea behind Envela Corp and Advance Auto Parts 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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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