Correlation Between Asbury Automotive and Abcellera Biologics

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

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

Diversification Opportunities for Asbury Automotive and Abcellera Biologics

0.14

Correlation Coefficient

Asbury Automotive  Abcellera Biologics

Average diversification

The 3 months correlation between Asbury and Abcellera is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Abcellera Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abcellera Biologics and Asbury Automotive 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 Asbury Automotive Group are associated (or correlated) with Abcellera Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abcellera Biologics has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Abcellera Biologics go up and down completely randomly.

Pair Corralation between Asbury Automotive and Abcellera Biologics

Considering the 90-day investment horizon Asbury Automotive is expected to generate 2.05 times less return on investment than Abcellera Biologics. But when comparing it to its historical volatility, Asbury Automotive Group is 2.47 times less risky than Abcellera Biologics. It trades about 0.14 of its potential returns per unit of risk. Abcellera Biologics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  272.00  in Abcellera Biologics on October 25, 2024 and sell it today you would earn a total of  82.50  from holding Abcellera Biologics or generate 30.33% return on investment over 90 days.

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

Asbury Automotive Group  vs.  Abcellera Biologics

Asbury Automotive

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Asbury Automotive reported solid returns over the last few months and may actually be approaching a breakup point.

Abcellera Biologics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Abcellera Biologics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Abcellera Biologics disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asbury Automotive and Abcellera Biologics

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

The idea behind Asbury Automotive Group and Abcellera Biologics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.