Correlation Between AutoNation and LL Flooring
Can any of the company-specific risk be diversified away by investing in both AutoNation and LL Flooring 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 AutoNation and LL Flooring into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoNation and LL Flooring Holdings, you can compare the effects of market volatilities on AutoNation and LL Flooring 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 AutoNation with a short position of LL Flooring. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and LL Flooring.
Diversification Opportunities for AutoNation and LL Flooring
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between AutoNation and LL Flooring is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and LL Flooring Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LL Flooring Holdings and AutoNation 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 AutoNation are associated (or correlated) with LL Flooring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LL Flooring Holdings has no effect on the direction of AutoNation i.e., AutoNation and LL Flooring go up and down completely randomly.
Pair Corralation between AutoNation and LL Flooring
Allowing for the 90-day total investment horizon AutoNation is expected to generate 0.84 times more return on investment than LL Flooring. However, AutoNation is 1.19 times less risky than LL Flooring. It trades about -0.12 of its potential returns per unit of risk. LL Flooring Holdings is currently generating about -0.35 per unit of risk. If you would invest 16,168 in AutoNation on January 20, 2024 and sell it today you would lose (754.00) from holding AutoNation or give up 4.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
AutoNation vs. LL Flooring Holdings
Performance |
| Timeline |
| AutoNation |
| LL Flooring Holdings |
AutoNation and LL Flooring Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoNation and LL Flooring
The main advantage of trading using opposite AutoNation and LL Flooring positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation position performs unexpectedly, LL Flooring 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 LL Flooring will offset losses from the drop in LL Flooring's long position.| AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation vs. Penske Automotive Group |
| LL Flooring vs. Arhaus Inc | LL Flooring vs. Haverty Furniture Companies | LL Flooring vs. Kirklands | LL Flooring vs. Live Ventures |
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 the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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