Correlation Between Asbury Automotive and Group 1

Can any of the company-specific risk be diversified away by investing in both Asbury Automotive and Group 1 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 Group 1 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 Group 1 Automotive, you can compare the effects of market volatilities on Asbury Automotive and Group 1 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 Group 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asbury Automotive and Group 1.

Diversification Opportunities for Asbury Automotive and Group 1

0.91

Correlation Coefficient

Asbury Automotive  Group 1

Almost no diversification

The 3 months correlation between Asbury and Group is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Group 1 Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group 1 Automotive 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 Group 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group 1 Automotive has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Group 1 go up and down completely randomly.

Pair Corralation between Asbury Automotive and Group 1

Considering the 90-day investment horizon Asbury Automotive Group is expected to under-perform the Group 1. In addition to that, Asbury Automotive is 1.22 times more volatile than Group 1 Automotive. It trades about -0.03 of its total potential returns per unit of risk. Group 1 Automotive is currently generating about -0.04 per unit of volatility. If you would invest  41,865  in Group 1 Automotive on December 28, 2024 and sell it today you would lose (2,547) from holding Group 1 Automotive or give up 6.08% of portfolio value over 90 days.

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

Asbury Automotive Group  vs.  Group 1 Automotive

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 fundamental drivers, Asbury Automotive is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Group 1 Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Group 1 Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Group 1 is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Asbury Automotive and Group 1

The main advantage of trading using opposite Asbury Automotive and Group 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asbury Automotive position performs unexpectedly, Group 1 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 Group 1 will offset losses from the drop in Group 1's long position.

The idea behind Asbury Automotive Group and Group 1 Automotive 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.