Correlation Between Asbury Automotive and Driven Brands

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

Diversification Opportunities for Asbury Automotive and Driven Brands

-0.22

Correlation Coefficient

Asbury Automotive  Driven Brands

Very good diversification

The 3 months correlation between Asbury and Driven is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Driven Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Driven Brands Holdings 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 Driven Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Driven Brands Holdings has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Driven Brands go up and down completely randomly.

Pair Corralation between Asbury Automotive and Driven Brands

Considering the 90-day investment horizon Asbury Automotive Group is expected to under-perform the Driven Brands. In addition to that, Asbury Automotive is 1.32 times more volatile than Driven Brands Holdings. It trades about -0.05 of its total potential returns per unit of risk. Driven Brands Holdings is currently generating about 0.1 per unit of volatility. If you would invest  1,596  in Driven Brands Holdings on December 28, 2024 and sell it today you would earn a total of  183.00  from holding Driven Brands Holdings or generate 11.47% return on investment over 90 days.

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

Asbury Automotive Group  vs.  Driven Brands Holdings

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 latest inconsistent performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Driven Brands Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Driven Brands Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Driven Brands may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Asbury Automotive and Driven Brands

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

The idea behind Asbury Automotive Group and Driven Brands Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.