Correlation Between AutoNation and Dicks Sporting

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

By analyzing existing cross correlation between AutoNation and Dicks Sporting Goods, you can compare the effects of market volatilities on AutoNation and Dicks Sporting 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 AutoNation with a short position of Dicks Sporting. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and Dicks Sporting.

Diversification Opportunities for AutoNation and Dicks Sporting

0.51

Correlation Coefficient

AutoNation  Dicks Sporting

Very weak diversification

The 3 months correlation between AutoNation and Dicks is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Dicks Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dicks Sporting Goods and AutoNation 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 AutoNation are associated (or correlated) with Dicks Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dicks Sporting Goods has no effect on the direction of AutoNation i.e., AutoNation and Dicks Sporting go up and down completely randomly.

Pair Corralation between AutoNation and Dicks Sporting

Allowing for the 90-day total investment horizon AutoNation is expected to under-perform the Dicks Sporting. But the stock apears to be less risky and, when comparing its historical volatility, AutoNation is 1.23 times less risky than Dicks Sporting. The stock trades about -0.01 of its potential returns per unit of risk. The Dicks Sporting Goods is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  21,613  in Dicks Sporting Goods on September 26, 2024 and sell it today you would earn a total of  918.00  from holding Dicks Sporting Goods or generate 4.25% return on investment over 90 days.

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

AutoNation  vs.  Dicks Sporting Goods

AutoNation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AutoNation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, AutoNation is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dicks Sporting Goods

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, Dicks Sporting is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AutoNation and Dicks Sporting

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

The idea behind AutoNation and Dicks Sporting Goods 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.