Correlation Between AutoNation and Live Ventures

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

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

Diversification Opportunities for AutoNation and Live Ventures

0.1

Correlation Coefficient

AutoNation  Live Ventures

Average diversification

The 3 months correlation between AutoNation and Live is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Live Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Ventures 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 Live Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Ventures has no effect on the direction of AutoNation i.e., AutoNation and Live Ventures go up and down completely randomly.

Pair Corralation between AutoNation and Live Ventures

Allowing for the 90-day total investment horizon AutoNation is expected to generate 0.45 times more return on investment than Live Ventures. However, AutoNation is 2.21 times less risky than Live Ventures. It trades about 0.04 of its potential returns per unit of risk. Live Ventures is currently generating about -0.2 per unit of risk. If you would invest  16,710  in AutoNation on September 16, 2024 and sell it today you would earn a total of  560.00  from holding AutoNation or generate 3.35% return on investment over 90 days.

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

AutoNation  vs.  Live Ventures

AutoNation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AutoNation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AutoNation is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Live Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Live Ventures 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 rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with AutoNation and Live Ventures

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

The idea behind AutoNation and Live Ventures 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.

Check out your portfolio center.

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.