Correlation Between Advance Auto and Hour Loop

Can any of the company-specific risk be diversified away by investing in both Advance Auto and Hour Loop 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 Advance Auto and Hour Loop into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advance Auto Parts and Hour Loop, you can compare the effects of market volatilities on Advance Auto and Hour Loop 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 Advance Auto with a short position of Hour Loop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Hour Loop.

Diversification Opportunities for Advance Auto and Hour Loop

-0.34

Correlation Coefficient

Advance Auto  Hour Loop

Very good diversification

The 3 months correlation between Advance and Hour is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Hour Loop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hour Loop and Advance Auto 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 Advance Auto Parts are associated (or correlated) with Hour Loop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hour Loop has no effect on the direction of Advance Auto i.e., Advance Auto and Hour Loop go up and down completely randomly.

Pair Corralation between Advance Auto and Hour Loop

Considering the 90-day investment horizon Advance Auto Parts is expected to under-perform the Hour Loop. But the stock apears to be less risky and, when comparing its historical volatility, Advance Auto Parts is 1.62 times less risky than Hour Loop. The stock trades about -0.08 of its potential returns per unit of risk. The Hour Loop is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  133.00  in Hour Loop on August 26, 2024 and sell it today you would earn a total of  16.00  from holding Hour Loop or generate 12.03% return on investment over 90 days.

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

Advance Auto Parts  vs.  Hour Loop

Advance Auto Parts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advance Auto Parts has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Hour Loop

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hour Loop are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hour Loop reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advance Auto and Hour Loop

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

The idea behind Advance Auto Parts and Hour Loop 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.