Correlation Between Duluth Holdings and Advance Auto

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

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

Diversification Opportunities for Duluth Holdings and Advance Auto

-0.34

Correlation Coefficient

Duluth Holdings  Advance Auto

Very good diversification

The 3 months correlation between Duluth and Advance is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Duluth Holdings and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts and Duluth Holdings 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 Duluth Holdings are associated (or correlated) with Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of Duluth Holdings i.e., Duluth Holdings and Advance Auto go up and down completely randomly.

Pair Corralation between Duluth Holdings and Advance Auto

Given the investment horizon of 90 days Duluth Holdings is expected to generate 4.81 times less return on investment than Advance Auto. But when comparing it to its historical volatility, Duluth Holdings is 1.11 times less risky than Advance Auto. It trades about 0.04 of its potential returns per unit of risk. Advance Auto Parts is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,009  in Advance Auto Parts on September 19, 2024 and sell it today you would earn a total of  437.00  from holding Advance Auto Parts or generate 10.9% return on investment over 90 days.

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

Duluth Holdings  vs.  Advance Auto Parts

Duluth Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duluth Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Advance Auto Parts

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advance Auto Parts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Advance Auto may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Duluth Holdings and Advance Auto

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

The idea behind Duluth Holdings and Advance Auto Parts 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 Stocks Directory module to find actively traded stocks across global markets.