Correlation Between Lowes Companies and AutoNation
Can any of the company-specific risk be diversified away by investing in both Lowes Companies and AutoNation 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 Lowes Companies and AutoNation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and AutoNation, you can compare the effects of market volatilities on Lowes Companies and AutoNation 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 Lowes Companies with a short position of AutoNation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and AutoNation.
Diversification Opportunities for Lowes Companies and AutoNation
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lowes and AutoNation is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and Lowes Companies 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 Lowes Companies are associated (or correlated) with AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Lowes Companies i.e., Lowes Companies and AutoNation go up and down completely randomly.
Pair Corralation between Lowes Companies and AutoNation
Considering the 90-day investment horizon Lowes Companies is expected to generate 1.65 times less return on investment than AutoNation. But when comparing it to its historical volatility, Lowes Companies is 1.56 times less risky than AutoNation. It trades about 0.04 of its potential returns per unit of risk. AutoNation is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 12,903 in AutoNation on January 20, 2024 and sell it today you would earn a total of 2,559 from holding AutoNation or generate 19.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Lowes Companies vs. AutoNation
Performance |
| Timeline |
| Lowes Companies |
| AutoNation |
Lowes Companies and AutoNation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and AutoNation
The main advantage of trading using opposite Lowes Companies and AutoNation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies position performs unexpectedly, AutoNation 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 AutoNation will offset losses from the drop in AutoNation's long position.| Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies | Lowes Companies vs. Kirklands | Lowes Companies vs. Live Ventures |
| AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation vs. Penske Automotive Group |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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