Correlation Between National Vision and Advance Auto

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

Diversification Opportunities for National Vision and Advance Auto

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between National and Advance is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings 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 National Vision 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 National Vision Holdings 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 National Vision i.e., National Vision and Advance Auto go up and down completely randomly.

Pair Corralation between National Vision and Advance Auto

Considering the 90-day investment horizon National Vision is expected to generate 2.2 times less return on investment than Advance Auto. In addition to that, National Vision is 1.66 times more volatile than Advance Auto Parts. It trades about 0.02 of its total potential returns per unit of risk. Advance Auto Parts is currently generating about 0.06 per unit of volatility. If you would invest  13,465  in Advance Auto Parts on February 17, 2022 and sell it today you would earn a total of  8,161  from holding Advance Auto Parts or generate 60.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

National Vision Holdings  vs.  Advance Auto Parts

 Performance (%) 
      Timeline 
National Vision Holdings 
National Performance
0 of 100
Over the last 90 days National Vision Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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

Advance Price Channel

National Vision and Advance Auto Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with National Vision and Advance Auto

The main advantage of trading using opposite National Vision and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Vision 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 National Vision Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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