Correlation Between TT Electronics and Asbury Automotive

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

By analyzing existing cross correlation between TT Electronics PLC and Asbury Automotive Group, you can compare the effects of market volatilities on TT Electronics and Asbury Automotive 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 TT Electronics with a short position of Asbury Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of TT Electronics and Asbury Automotive.

Diversification Opportunities for TT Electronics and Asbury Automotive

-0.45

Correlation Coefficient

TT Electronics  Asbury Automotive

Very good diversification

The 3 months correlation between 7TT and Asbury is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding TT Electronics PLC and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and TT Electronics 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 TT Electronics PLC are associated (or correlated) with Asbury Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asbury Automotive has no effect on the direction of TT Electronics i.e., TT Electronics and Asbury Automotive go up and down completely randomly.

Pair Corralation between TT Electronics and Asbury Automotive

Assuming the 90 days trading horizon TT Electronics PLC is expected to generate 1.18 times more return on investment than Asbury Automotive. However, TT Electronics is 1.18 times more volatile than Asbury Automotive Group. It trades about -0.2 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about -0.52 per unit of risk. If you would invest  102.00  in TT Electronics PLC on December 11, 2024 and sell it today you would lose (8.00) from holding TT Electronics PLC or give up 7.84% of portfolio value over 90 days.

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

TT Electronics PLC  vs.  Asbury Automotive Group

TT Electronics PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days TT Electronics PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Asbury Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asbury Automotive Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Asbury Automotive is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TT Electronics and Asbury Automotive

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

The idea behind TT Electronics PLC and Asbury Automotive Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.