Correlation Between Asbury Automotive and Gap,

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

Diversification Opportunities for Asbury Automotive and Gap,

0.73

Correlation Coefficient

Asbury Automotive  Gap,

Poor diversification

The 3 months correlation between Asbury and Gap, is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Gap, go up and down completely randomly.

Pair Corralation between Asbury Automotive and Gap,

Considering the 90-day investment horizon Asbury Automotive Group is expected to under-perform the Gap,. But the stock apears to be less risky and, when comparing its historical volatility, Asbury Automotive Group is 2.89 times less risky than Gap,. The stock trades about -0.1 of its potential returns per unit of risk. The The Gap, is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,210  in The Gap, on September 15, 2024 and sell it today you would earn a total of  219.00  from holding The Gap, or generate 9.91% return on investment over 90 days.

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

Asbury Automotive Group  vs.  The Gap,

Asbury Automotive

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental drivers, Asbury Automotive reported solid returns over the last few months and may actually be approaching a breakup point.

Gap,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asbury Automotive and Gap,

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

The idea behind Asbury Automotive Group and The Gap, 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.