Correlation Between AutoNation and MarineMax

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

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

Diversification Opportunities for AutoNation and MarineMax

0.64

Correlation Coefficient

AutoNation  MarineMax

Poor diversification

The 3 months correlation between AutoNation and MarineMax is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and MarineMax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MarineMax 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 MarineMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MarineMax has no effect on the direction of AutoNation i.e., AutoNation and MarineMax go up and down completely randomly.

Pair Corralation between AutoNation and MarineMax

Allowing for the 90-day total investment horizon AutoNation is expected to generate 0.56 times more return on investment than MarineMax. However, AutoNation is 1.78 times less risky than MarineMax. It trades about 0.15 of its potential returns per unit of risk. MarineMax is currently generating about 0.08 per unit of risk. If you would invest  16,200  in AutoNation on August 24, 2024 and sell it today you would earn a total of  1,105  from holding AutoNation or generate 6.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

AutoNation  vs.  MarineMax

AutoNation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AutoNation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, AutoNation is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

MarineMax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MarineMax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, MarineMax is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AutoNation and MarineMax

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

The idea behind AutoNation and MarineMax 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.