Correlation Between OReilly Automotive and Caldwell Partners

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

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

Diversification Opportunities for OReilly Automotive and Caldwell Partners

-0.89

Correlation Coefficient

OReilly Automotive  Caldwell Partners

Pay attention - limited upside

The 3 months correlation between OReilly and Caldwell is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding OReilly Automotive and The Caldwell Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caldwell Partners and OReilly Automotive 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 OReilly Automotive are associated (or correlated) with Caldwell Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caldwell Partners has no effect on the direction of OReilly Automotive i.e., OReilly Automotive and Caldwell Partners go up and down completely randomly.

Pair Corralation between OReilly Automotive and Caldwell Partners

Given the investment horizon of 90 days OReilly Automotive is expected to generate 0.39 times more return on investment than Caldwell Partners. However, OReilly Automotive is 2.56 times less risky than Caldwell Partners. It trades about 0.14 of its potential returns per unit of risk. The Caldwell Partners is currently generating about -0.13 per unit of risk. If you would invest  119,760  in OReilly Automotive on January 9, 2025 and sell it today you would earn a total of  15,085  from holding OReilly Automotive or generate 12.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

OReilly Automotive  vs.  The Caldwell Partners

OReilly Automotive

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, OReilly Automotive showed solid returns over the last few months and may actually be approaching a breakup point.

Caldwell Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Caldwell Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with OReilly Automotive and Caldwell Partners

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

The idea behind OReilly Automotive and The Caldwell Partners 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.