Correlation Between Standard and Holley

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

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

Diversification Opportunities for Standard and Holley

0.19

Correlation Coefficient

Standard  Holley

Average diversification

The 3 months correlation between Standard and Holley is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Standard Motor Products and Holley Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holley Inc and Standard 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 Standard Motor Products are associated (or correlated) with Holley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holley Inc has no effect on the direction of Standard i.e., Standard and Holley go up and down completely randomly.

Pair Corralation between Standard and Holley

Considering the 90-day investment horizon Standard Motor Products is expected to generate 1.23 times more return on investment than Holley. However, Standard is 1.23 times more volatile than Holley Inc. It trades about 0.05 of its potential returns per unit of risk. Holley Inc is currently generating about -0.04 per unit of risk. If you would invest  3,147  in Standard Motor Products on September 4, 2024 and sell it today you would earn a total of  236.00  from holding Standard Motor Products or generate 7.5% return on investment over 90 days.

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

Standard Motor Products  vs.  Holley Inc

Standard Motor Products

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Motor Products are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Standard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Holley Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holley Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Standard and Holley

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

The idea behind Standard Motor Products and Holley Inc 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 Global Correlations module to find global opportunities by holding instruments from different markets.