Correlation Between Caseys General and OReilly Automotive

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

By analyzing existing cross correlation between Caseys General Stores and OReilly Automotive, you can compare the effects of market volatilities on Caseys General and OReilly Automotive 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 Caseys General with a short position of OReilly Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caseys General and OReilly Automotive.

Diversification Opportunities for Caseys General and OReilly Automotive

0.67

Correlation Coefficient

Caseys General  OReilly Automotive

Poor diversification

The 3 months correlation between Caseys and OReilly is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and OReilly Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OReilly Automotive and Caseys General 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 Caseys General Stores are associated (or correlated) with OReilly Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OReilly Automotive has no effect on the direction of Caseys General i.e., Caseys General and OReilly Automotive go up and down completely randomly.

Pair Corralation between Caseys General and OReilly Automotive

Given the investment horizon of 90 days Caseys General Stores is expected to generate 1.85 times more return on investment than OReilly Automotive. However, Caseys General is 1.85 times more volatile than OReilly Automotive. It trades about 0.18 of its potential returns per unit of risk. OReilly Automotive is currently generating about 0.05 per unit of risk. If you would invest  37,195  in Caseys General Stores on August 8, 2024 and sell it today you would earn a total of  2,495  from holding Caseys General Stores or generate 6.71% return on investment over 90 days.

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

Caseys General Stores  vs.  OReilly Automotive

Caseys General Stores

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caseys General Stores are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Caseys General may actually be approaching a critical reversion point that can send shares even higher in December 2024.

OReilly Automotive

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, OReilly Automotive is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caseys General and OReilly Automotive

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

The idea behind Caseys General Stores and OReilly Automotive 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.