Correlation Between Asbury Automotive and Atmus Filtration

Can any of the company-specific risk be diversified away by investing in both Asbury Automotive and Atmus Filtration 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 Atmus Filtration 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 Atmus Filtration Technologies, you can compare the effects of market volatilities on Asbury Automotive and Atmus Filtration 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 Atmus Filtration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asbury Automotive and Atmus Filtration.

Diversification Opportunities for Asbury Automotive and Atmus Filtration

0.84

Correlation Coefficient

Asbury Automotive  Atmus Filtration

Very poor diversification

The 3 months correlation between Asbury and Atmus is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Atmus Filtration Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmus Filtration Tec 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 Atmus Filtration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmus Filtration Tec has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Atmus Filtration go up and down completely randomly.

Pair Corralation between Asbury Automotive and Atmus Filtration

Considering the 90-day investment horizon Asbury Automotive Group is expected to under-perform the Atmus Filtration. In addition to that, Asbury Automotive is 1.4 times more volatile than Atmus Filtration Technologies. It trades about -0.2 of its total potential returns per unit of risk. Atmus Filtration Technologies is currently generating about -0.16 per unit of volatility. If you would invest  4,064  in Atmus Filtration Technologies on October 12, 2024 and sell it today you would lose (124.00) from holding Atmus Filtration Technologies or give up 3.05% of portfolio value over 90 days.

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

Asbury Automotive Group  vs.  Atmus Filtration Technologies

Asbury Automotive

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Asbury Automotive may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Atmus Filtration Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atmus Filtration Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Atmus Filtration is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Asbury Automotive and Atmus Filtration

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

The idea behind Asbury Automotive Group and Atmus Filtration Technologies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.