Correlation Between OReilly Automotive and RH

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

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

Diversification Opportunities for OReilly Automotive and RH

0.35

Correlation Coefficient

OReilly Automotive  RH

Weak diversification

The 3 months correlation between OReilly and RH is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding OReilly Automotive and RH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RH 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 RH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RH has no effect on the direction of OReilly Automotive i.e., OReilly Automotive and RH go up and down completely randomly.

Pair Corralation between OReilly Automotive and RH

Given the investment horizon of 90 days OReilly Automotive is expected to generate 1.65 times less return on investment than RH. But when comparing it to its historical volatility, OReilly Automotive is 3.16 times less risky than RH. It trades about 0.09 of its potential returns per unit of risk. RH is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  18,631  in RH on May 5, 2025 and sell it today you would earn a total of  1,445  from holding RH or generate 7.76% return on investment over 90 days.

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

OReilly Automotive  vs.  RH

OReilly Automotive

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, OReilly Automotive may actually be approaching a critical reversion point that can send shares even higher in September 2025.

RH

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RH are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, RH may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with OReilly Automotive and RH

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

The idea behind OReilly Automotive and RH 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.