Correlation Between Genuine Parts and Advance Auto

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

Diversification Opportunities for Genuine Parts and Advance Auto

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Genuine and Advance is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts 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 Genuine Parts 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 Genuine Parts 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 Genuine Parts i.e., Genuine Parts and Advance Auto go up and down completely randomly.

Pair Corralation between Genuine Parts and Advance Auto

Considering the 90-day investment horizon Genuine Parts is expected to generate 0.52 times more return on investment than Advance Auto. However, Genuine Parts is 1.93 times less risky than Advance Auto. It trades about -0.09 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.22 per unit of risk. If you would invest  13,364  in Genuine Parts on February 21, 2022 and sell it today you would lose (510.00)  from holding Genuine Parts or give up 3.82% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Genuine Parts  vs.  Advance Auto Parts

 Performance (%) 
      Timeline 
Genuine Parts 
Genuine Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Genuine Parts is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Genuine 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 latest weak 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

Genuine Parts and Advance Auto Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Genuine Parts and Advance Auto

The main advantage of trading using opposite Genuine Parts and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts 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 Genuine Parts 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.

Advance Auto Parts

Pair trading matchups for Advance Auto

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 Commodity Channel Index module to use Commodity Channel Index to analyze current equity momentum.

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