Advance Stock Volatility

AAP -  USA Stock  

USD 190.90  5.59  3.02%

We consider Advance Auto very steady. Advance Auto Parts secures Sharpe Ratio (or Efficiency) of 0.0393, which signifies that the company had 0.0393% of return per unit of risk over the last 20 months. Our standpoint towards foreseeing the volatility of a stock is to use all available market data together with stock-specific technical indicators that cannot be diversified away. We have found twenty-eight technical indicators for Advance Auto Parts, which you can use to evaluate the future volatility of the firm. Please confirm Advance Auto Parts Downside Deviation of 1.87, risk adjusted performance of 0.0425, and Mean Deviation of 1.34 to double-check if the risk estimate we provide is consistent with the expected return of 0.071%.
  
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Advance Auto Stock volatility depicts how high the prices fluctuate around the mean (or its average) price. In other words, it is a statistical measure of the distribution of Advance daily returns, and it is calculated using variance and standard deviation. We also use Advance's beta, its sensitivity to the market, as well as its odds of financial distress to provide a more practical estimation of Advance Auto volatility.

270 Days Market Risk

Very steady

Chance of Distress

270 Days Economic Sensitivity

Almost mirrors the market
Since volatility provides investors with entry points to take advantage of stock prices, companies, such as Advance Auto can benefit from it. Downward market volatility can be a perfect environment for investors who play the long game. Here, they may decide to buy additional stocks of Advance Auto at lower prices. For example, an investor can purchase Advance stock that has halved in price over a short period. This will lower your average cost per share, thereby improving your portfolio's performance when the markets normalize. Similarly, when the prices of Advance Auto's stock rises, investors can sell out and invest the proceeds in other equities with better opportunities. Investing when markets are volatile with better valuations will accord both investors and companies the opportunity to generate better long-term returns.

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Advance Auto Market Sensitivity And Downside Risk

Advance Auto's beta coefficient measures the volatility of Advance stock compared to the systematic risk of the entire stock market represented by your selected benchmark. In mathematical terms, beta represents the slope of the line through a regression of data points where each of these points represents Advance stock's returns against your selected market. In other words, Advance Auto's beta of 1.01 provides an investor with an approximation of how much risk Advance Auto stock can potentially add to one of your existing portfolios.
Let's try to break down what Advance's beta means in this case. Advance Auto returns are very sensitive to returns on the market. As the market goes up or down, Advance Auto is expected to follow.
20 Months Beta |Analyze Advance Auto Parts Demand Trend
Check current 90 days Advance Auto correlation with market (DOW)

Advance Beta

    
  1.01  
Advance standard deviation measures the daily dispersion of prices over your selected time horizon relative to its mean. Typical volatile equity has a high standard deviation, while the deviation of a stable instrument is usually low. As a downside, the standard deviation calculates all uncertainty as risk, even when it is in your favor, such as above-average returns.

Standard Deviation

    
  1.8  
It is essential to understand the difference between upside risk (as represented by Advance Auto's standard deviation) and the downside risk, which can be measured by semi-deviation or downside deviation of Advance Auto stock's daily returns or price. Since the actual investment returns on holding a position in Advance Auto stock tend to have a non-normal distribution, there will be different probabilities for losses than for gains. The likelihood of losses is reflected in the downside risk of an investment in Advance Auto.

Advance Auto Implied Volatility

    
  46.88  
Advance Auto's implied volatility exposes the market's sentiment of Advance Auto Parts stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if Advance Auto's implied volatility is high, the market thinks the stock has potential for high price swings in either direction. On the other hand, the low implied volatility suggests that Advance Auto stock will not fluctuate a lot when Advance Auto's options are near their expiration.

Advance Auto Parts Stock Volatility Analysis

Volatility refers to the frequency at which Advance Auto stock price increases or decreases within a specified period. These fluctuations usually indicate the level of risk that's associated with Advance Auto's price changes. Investors will then calculate the volatility of Advance Auto's stock to predict their future moves. A stock that has erratic price changes quickly hits new highs, and lows are considered highly volatile. A stock with relatively stable price changes has low volatility. A highly volatile stock is riskier, but the risk cuts both ways. Investing in highly volatile security can either be highly successful, or you may experience significant failure. There are two main types of Advance Auto's volatility:

Historical Volatility

This type of stock volatility measures Advance Auto's fluctuations based on previous trends. It's commonly used to predict Advance Auto's future behavior based on its past. However, it cannot conclusively determine the future direction of the stock.

Implied Volatility

This type of volatility provides a positive outlook on future price fluctuations for Advance Auto's current market price. This means that the stock will return to its initially predicted market price.
Transformation
The output start index for this execution was zero with a total number of output elements of four hundred thirty-five. Advance Auto Parts Average Price is the average of the sum of open, high, low and close daily prices of a bar. It can be used to smooth an indicator that normally takes just the closing price as input.
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Advance Auto Projected Return Density Against Market

Considering the 90-day investment horizon the stock has the beta coefficient of 1.0064 . This suggests Advance Auto Parts market returns are highly reactive to returns on the market. As the market goes up or down, Advance Auto is expected to follow.
Most traded equities are subject to two types of risk - systematic (i.e., market) and unsystematic (i.e., nonmarket or company-specific) risk. Unsystematic risk is the risk that events specific to Advance Auto or Consumer Cyclical sector will adversely affect the stock's price. This type of risk can be diversified away by owning several different stocks in different industries whose stock prices have shown a small correlation to each other. On the other hand, systematic risk is the risk that Advance Auto stock's price will be affected by overall stock market movements and cannot be diversified away. So, no matter how many positions you have, you cannot eliminate market risk. However, you can measure a Advance stock's historical response to market movements and buy it if you are comfortable with its volatility direction. Beta and standard deviation are two commonly used measures to help you make the right decision.
The company has an alpha of 0.0352, implying that it can generate a 0.0352 percent excess return over DOW after adjusting for the inherited market risk (beta).
 Predicted Return Density 
      Returns 
Advance Auto's volatility is measured either by using standard deviation or beta. Standard deviation will reflect the average amount of how Advance Auto stock's price will differ from the mean after some time.To get its calculation, you should first determine the mean price during the specified period then subtract that from each price point.

What Drives a Company's Stock Price Volatility?

Several factors can influence a company's stock volatility:

Industry

Specific events can influence volatility within a particular industry. For instance, a significant weather upheaval in a crucial oil-production site may cause oil prices to increase in the oil sector. The direct result will be the rise in the stock price of oil distribution companies. Similarly, any government regulation in a specific industry could negatively influence stock prices due to increased regulations on compliance that may impact the company's future earnings and growth.

Political and Economic environment

When governments make significant decisions regarding trade agreements, policies, and legislation regarding specific industries, they will influence stock prices. Everything from speeches to elections may influence investors, who can directly influence the stock prices in any particular industry. The prevailing economic situation also plays a significant role in stock prices. When the economy is doing well, investors will have a positive reaction and hence, better stock prices and vice versa.

The Company's Performance

Sometimes volatility will only affect an individual company. For example, a revolutionary product launch or strong earnings report may attract many investors to purchase the company. This positive attention will raise the company's stock price. In contrast, product recalls and data breaches may negatively influence a company's stock prices.

Advance Auto Stock Risk Measures

Most traded equities are subject to two types of risk - systematic (i.e., market) and unsystematic (i.e., nonmarket or company-specific) risk. Unsystematic risk is the risk that events specific to Advance Auto or Consumer Cyclical sector will adversely affect the stock's price. This type of risk can be diversified away by owning several different stocks in different industries whose stock prices have shown a small correlation to each other. On the other hand, systematic risk is the risk that Advance Auto stock's price will be affected by overall stock market movements and cannot be diversified away. So, no matter how many positions you have, you cannot eliminate market risk. However, you can measure a Advance stock's historical response to market movements and buy it if you are comfortable with its volatility direction. Beta and standard deviation are two commonly used measures to help you make the right decision.
Considering the 90-day investment horizon the coefficient of variation of Advance Auto is 2542.16. The daily returns are distributed with a variance of 3.26 and standard deviation of 1.8. The mean deviation of Advance Auto Parts is currently at 1.35. For similar time horizon, the selected benchmark (DOW) has volatility of 0.97
α
Alpha over DOW
0.0352
β
Beta against DOW1.01
σ
Overall volatility
1.80
Ir
Information ratio 0.0198

Advance Auto Stock Return Volatility

Advance Auto historical daily return volatility represents how much Advance Auto stock's price daily returns swing around its mean daily price change - it is a statistical measure of its dispersion of returns. The firm has volatility of 1.8049% on return distribution over 90 days investment horizon. By contrast, DOW inherits 0.9528% risk (volatility on return distribution) over the 90 days horizon.
 Performance (%) 
      Timeline 

About Advance Auto Volatility

Volatility is a rate at which the price of Advance Auto or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Advance Auto may increase or decrease. In other words, similar to Advance's beta indicator, it measures the risk of Advance Auto and helps estimate the fluctuations that may happen in a short period of time. So if prices of Advance Auto fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility.
Please read more on our technical analysis page.
Last ReportedProjected for 2022
Market Capitalization15 B14.4 B
Advance Auto Parts, Inc. provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks. The company was founded in 1929 and is based in Raleigh, North Carolina. Advance Auto operates under Specialty Retail classification in the United States and is traded on New York Stock Exchange. It employs 41000 people.

Nearest Advance long CALL Option Payoff at Expiration

Advance Auto's implied volatility is one of the determining factors in the pricing options written on Advance Auto Parts. Implied volatility approximates the future value of Advance Autousing the option's current value. Options with high implied volatility have higher premiums and can be used to hedge the downside of investing in Advance Auto Parts over a specific time period.
View All Advance options
2022-06-17 CALL at $100.0 is a CALL option contract on Advance Auto's common stock with a strick price of 100.0 expiring on 2022-06-17. The contract was not traded in recent days and, as of today, has 21 days remaining before the expiration. The option is currently trading at a bid price of $83.5, and an ask price of $87.5. The implied volatility as of the 27th of May is 123.4653.
 Profit 
Share
      Advance Auto Price At Expiration 

Advance Auto Investment Opportunity

Advance Auto Parts has a volatility of 1.8 and is 1.89 times more volatile than DOW. 15  of all equities and portfolios are less risky than Advance Auto. Compared to the overall equity markets, volatility of historical daily returns of Advance Auto Parts is lower than 15 () of all global equities and portfolios over the last 90 days. Use Advance Auto Parts to enhance returns of your portfolios. The stock experiences an unexpected upward trend. Watch out for market signals. Check odds of Advance Auto to be traded at $229.08 in 90 days. . Let's try to break down what Advance's beta means in this case. Advance Auto returns are very sensitive to returns on the market. As the market goes up or down, Advance Auto is expected to follow.

Very weak diversification

The correlation between Advance Auto Parts and DJI is Very weak diversification for selected investment horizon. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and DJI in the same portfolio, assuming nothing else is changed.

Advance Auto Additional Risk Indicators

The analysis of Advance Auto's secondary risk indicators is one of the essential steps in making a buy or sell decision. The process involves identifying the amount of risk involved in Advance Auto's investment and either accepting that risk or mitigating it. Along with some common measures of Advance Auto stock risk such as standard deviation, beta, or value at risk, we also provide a set of secondary indicators that can assist in the individual investment decision or help in hedging the risk of your existing portfolios.
Risk Adjusted Performance0.0425
Market Risk Adjusted Performance0.0693
Mean Deviation1.34
Semi Deviation1.83
Downside Deviation1.87
Coefficient Of Variation2566.45
Standard Deviation1.79
Please note, the risk measures we provide can be used independently or collectively to perform a risk assessment. When comparing two potential stock investments, we recommend comparing similar equities with homogenous growth potential and valuation from related markets to determine which investment holds the most risk.

Advance Auto Suggested Diversification Pairs

Pair trading is one of the very effective strategies used by professional day traders and hedge funds capitalizing on short-time and mid-term market inefficiencies. The approach is based on the fact that the ratio of prices of two correlating shares is long-term stable and oscillates around the average value. If the correlation ratio comes outside the common area, you can speculate with a high success rate that the ratio will return to the mean value and collect a profit.
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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Advance Auto as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Advance Auto's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Advance Auto's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Advance Auto Parts.
Please continue to Trending Equities. Note that the Advance Auto Parts information on this page should be used as a complementary analysis to other Advance Auto's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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When running Advance Auto Parts price analysis, check to measure Advance Auto's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Advance Auto is operating at the current time. Most of Advance Auto's value examination focuses on studying past and present price action to predict the probability of Advance Auto's future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move Advance Auto's price. Additionally, you may evaluate how the addition of Advance Auto to your portfolios can decrease your overall portfolio volatility.
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Is Advance Auto's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Advance Auto. If investors know Advance will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Advance Auto listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
The market value of Advance Auto Parts is measured differently than its book value, which is the value of Advance that is recorded on the company's balance sheet. Investors also form their own opinion of Advance Auto's value that differs from its market value or its book value, called intrinsic value, which is Advance Auto's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Advance Auto's market value can be influenced by many factors that don't directly affect Advance Auto's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Advance Auto's value and its price as these two are different measures arrived at by different means. Investors typically determine Advance Auto value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Advance Auto's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.