Correlation Between OReilly Automotive and Vita Coco

Can any of the company-specific risk be diversified away by investing in both OReilly Automotive and Vita Coco 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 Vita Coco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between OReilly Automotive and Vita Coco, you can compare the effects of market volatilities on OReilly Automotive and Vita Coco 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 Vita Coco. Check out your portfolio center. Please also check ongoing floating volatility patterns of OReilly Automotive and Vita Coco.

Diversification Opportunities for OReilly Automotive and Vita Coco

0.72

Correlation Coefficient

OReilly Automotive  Vita Coco

Poor diversification

The 3 months correlation between OReilly and Vita is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding OReilly Automotive and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco 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 Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of OReilly Automotive i.e., OReilly Automotive and Vita Coco go up and down completely randomly.

Pair Corralation between OReilly Automotive and Vita Coco

Given the investment horizon of 90 days OReilly Automotive is expected to generate 0.69 times more return on investment than Vita Coco. However, OReilly Automotive is 1.46 times less risky than Vita Coco. It trades about -0.08 of its potential returns per unit of risk. Vita Coco is currently generating about -0.07 per unit of risk. If you would invest  108,742  in OReilly Automotive on January 30, 2024 and sell it today you would lose (4,349) from holding OReilly Automotive or give up 4.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

OReilly Automotive  vs.  Vita Coco

OReilly Automotive

Risk-Adjusted Performance

0 of 100

Weak

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Vita Coco

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OReilly Automotive and Vita Coco

The main advantage of trading using opposite OReilly Automotive and Vita Coco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OReilly Automotive position performs unexpectedly, Vita Coco 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 Vita Coco will offset losses from the drop in Vita Coco's long position.

The idea behind OReilly Automotive and Vita Coco 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 the Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.