Correlation Between OReilly Automotive and Advance Auto

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

Diversification Opportunities for OReilly Automotive and Advance Auto

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between OReilly and Advance is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding OReilly Automotive 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 OReilly Automotive 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 OReilly Automotive 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 OReilly Automotive i.e., OReilly Automotive and Advance Auto go up and down completely randomly.

Pair Corralation between OReilly Automotive and Advance Auto

Given the investment horizon of 90 days OReilly Automotive is expected to generate 0.88 times more return on investment than Advance Auto. However, OReilly Automotive is 1.14 times less risky than Advance Auto. It trades about 0.05 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.11 per unit of risk. If you would invest  61,065  in OReilly Automotive on April 1, 2022 and sell it today you would earn a total of  2,111  from holding OReilly Automotive or generate 3.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

OReilly Automotive  vs.  Advance Auto Parts

 Performance (%) 
      Timeline 
OReilly Automotive 
OReilly Performance
0 of 100
Over the last 90 days OReilly Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, OReilly Automotive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Structure and Payout Changes

Last Split Factor
2:1
Last Split Date
2005-06-16

OReilly 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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2022. The recent disarray may also be a sign of long period up-swing for the firm insiders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.034
Payout Ratio
0.41
Last Split Factor
3:2
Forward Annual Dividend Rate
6.0
Dividend Date
2022-07-01
Ex Dividend Date
2022-06-16
Last Split Date
2005-09-26

Advance Price Channel

OReilly Automotive and Advance Auto Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with OReilly Automotive and Advance Auto

The main advantage of trading using opposite OReilly Automotive and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OReilly Automotive 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 OReilly Automotive 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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