Correlation Between AutoZone and GOME Retail

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

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

Diversification Opportunities for AutoZone and GOME Retail

-0.51

Correlation Coefficient

AutoZone  GOME Retail

Excellent diversification

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

Pair Corralation between AutoZone and GOME Retail

If you would invest  297,100  in AutoZone on September 23, 2024 and sell it today you would earn a total of  14,600  from holding AutoZone or generate 4.91% return on investment over 90 days.

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

AutoZone  vs.  GOME Retail Holdings

AutoZone

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AutoZone reported solid returns over the last few months and may actually be approaching a breakup point.

GOME Retail Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GOME Retail Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GOME Retail unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AutoZone and GOME Retail

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

The idea behind AutoZone and GOME Retail Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.