Correlation Between Nasdaq and AutoZone

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

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

Diversification Opportunities for Nasdaq and AutoZone

0.74

Correlation Coefficient

Nasdaq  AutoZone

Poor diversification

The 3 months correlation between Nasdaq and AutoZone is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone and Nasdaq 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 Nasdaq Inc are associated (or correlated) with AutoZone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoZone has no effect on the direction of Nasdaq i.e., Nasdaq and AutoZone go up and down completely randomly.

Pair Corralation between Nasdaq and AutoZone

Given the investment horizon of 90 days Nasdaq is expected to generate 2.73 times less return on investment than AutoZone. But when comparing it to its historical volatility, Nasdaq Inc is 1.44 times less risky than AutoZone. It trades about 0.08 of its potential returns per unit of risk. AutoZone is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  269,500  in AutoZone on September 23, 2024 and sell it today you would earn a total of  42,200  from holding AutoZone or generate 15.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Nasdaq Inc  vs.  AutoZone

Nasdaq Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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.

Pair Trading with Nasdaq and AutoZone

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

The idea behind Nasdaq Inc and AutoZone 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.