Correlation Between Monro Muffler and Standard

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

By analyzing existing cross correlation between Monro Muffler Brake and Standard Motor Products, you can compare the effects of market volatilities on Monro Muffler and Standard 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 Monro Muffler with a short position of Standard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monro Muffler and Standard.

Diversification Opportunities for Monro Muffler and Standard

0.41

Correlation Coefficient

Monro Muffler  Standard

Very weak diversification

The 3 months correlation between Monro and Standard is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Monro Muffler Brake and Standard Motor Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Motor Products and Monro Muffler 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 Monro Muffler Brake are associated (or correlated) with Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Motor Products has no effect on the direction of Monro Muffler i.e., Monro Muffler and Standard go up and down completely randomly.

Pair Corralation between Monro Muffler and Standard

Given the investment horizon of 90 days Monro Muffler Brake is expected to under-perform the Standard. In addition to that, Monro Muffler is 1.13 times more volatile than Standard Motor Products. It trades about -0.16 of its total potential returns per unit of risk. Standard Motor Products is currently generating about -0.01 per unit of volatility. If you would invest  3,082  in Standard Motor Products on February 17, 2025 and sell it today you would lose (101.00) from holding Standard Motor Products or give up 3.28% of portfolio value over 90 days.

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

Monro Muffler Brake  vs.  Standard Motor Products

Monro Muffler Brake

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monro Muffler Brake has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Standard Motor Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Standard Motor Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Standard is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Monro Muffler and Standard

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

The idea behind Monro Muffler Brake and Standard Motor Products 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.