Correlation Between Advance Auto and Lupatech

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

By analyzing existing cross correlation between Advance Auto Parts and Lupatech SA, you can compare the effects of market volatilities on Advance Auto and Lupatech 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 Advance Auto with a short position of Lupatech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Lupatech.

Diversification Opportunities for Advance Auto and Lupatech

-0.75

Correlation Coefficient

Advance Auto  Lupatech

Pay attention - limited upside

The 3 months correlation between Advance and Lupatech is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Lupatech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lupatech SA and Advance Auto 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 Advance Auto Parts are associated (or correlated) with Lupatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lupatech SA has no effect on the direction of Advance Auto i.e., Advance Auto and Lupatech go up and down completely randomly.

Pair Corralation between Advance Auto and Lupatech

Assuming the 90 days trading horizon Advance Auto Parts is expected to generate 1.13 times more return on investment than Lupatech. However, Advance Auto is 1.13 times more volatile than Lupatech SA. It trades about 0.12 of its potential returns per unit of risk. Lupatech SA is currently generating about -0.08 per unit of risk. If you would invest  1,369  in Advance Auto Parts on September 26, 2024 and sell it today you would earn a total of  313.00  from holding Advance Auto Parts or generate 22.86% return on investment over 90 days.

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

Advance Auto Parts  vs.  Lupatech SA

Advance Auto Parts

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advance Auto Parts are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Advance Auto sustained solid returns over the last few months and may actually be approaching a breakup point.

Lupatech SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lupatech SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Advance Auto and Lupatech

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

The idea behind Advance Auto Parts and Lupatech SA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.