Correlation Between Monro Muffler and Autoliv

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

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

Diversification Opportunities for Monro Muffler and Autoliv

0.36

Correlation Coefficient

Monro Muffler  Autoliv

Weak diversification

The 3 months correlation between Monro and Autoliv is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Monro Muffler Brake and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and Monro Muffler 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 Monro Muffler Brake are associated (or correlated) with Autoliv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autoliv has no effect on the direction of Monro Muffler i.e., Monro Muffler and Autoliv go up and down completely randomly.

Pair Corralation between Monro Muffler and Autoliv

Given the investment horizon of 90 days Monro Muffler Brake is expected to under-perform the Autoliv. In addition to that, Monro Muffler is 1.08 times more volatile than Autoliv. It trades about -0.04 of its total potential returns per unit of risk. Autoliv is currently generating about 0.0 per unit of volatility. If you would invest  9,234  in Autoliv on September 23, 2024 and sell it today you would lose (44.00) from holding Autoliv or give up 0.48% of portfolio value over 90 days.

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

Monro Muffler Brake  vs.  Autoliv

Monro Muffler Brake

Risk-Adjusted Performance

0 of 100

Very Weak

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

Autoliv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Autoliv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Autoliv is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Monro Muffler and Autoliv

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

The idea behind Monro Muffler Brake and Autoliv 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.