Correlation Between Advance Auto and Interface
Can any of the company-specific risk be diversified away by investing in both Advance Auto and Interface 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 Interface 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 Interface, you can compare the effects of market volatilities on Advance Auto and Interface 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 Interface. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Interface.
Diversification Opportunities for Advance Auto and Interface
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Advance and Interface is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Interface in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interface 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 Interface. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interface has no effect on the direction of Advance Auto i.e., Advance Auto and Interface go up and down completely randomly.
Pair Corralation between Advance Auto and Interface
Considering the 90-day investment horizon Advance Auto Parts is expected to generate 4.37 times more return on investment than Interface. However, Advance Auto is 4.37 times more volatile than Interface. It trades about 0.16 of its potential returns per unit of risk. Interface is currently generating about 0.13 per unit of risk. If you would invest 3,250 in Advance Auto Parts on April 21, 2025 and sell it today you would earn a total of 2,863 from holding Advance Auto Parts or generate 88.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Advance Auto Parts vs. Interface
Performance |
Timeline |
Advance Auto Parts |
Interface |
Advance Auto and Interface Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Advance Auto and Interface
The main advantage of trading using opposite Advance Auto and Interface positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Interface 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 Interface will offset losses from the drop in Interface's long position.Advance Auto vs. AutoZone | Advance Auto vs. BorgWarner | Advance Auto vs. Five Below | Advance Auto vs. Genuine Parts Co |
Interface vs. Gibraltar Industries | Interface vs. Janus International Group | Interface vs. Quanex Building Products | Interface vs. Jeld Wen Holding |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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