Correlation Between Asbury Automotive and Goosehead Insurance

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

Diversification Opportunities for Asbury Automotive and Goosehead Insurance

0.78

Correlation Coefficient

Asbury Automotive  Goosehead Insurance

Poor diversification

The 3 months correlation between Asbury and Goosehead is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Goosehead Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goosehead Insurance 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 Goosehead Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goosehead Insurance has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Goosehead Insurance go up and down completely randomly.

Pair Corralation between Asbury Automotive and Goosehead Insurance

Considering the 90-day investment horizon Asbury Automotive Group is expected to generate 0.62 times more return on investment than Goosehead Insurance. However, Asbury Automotive Group is 1.61 times less risky than Goosehead Insurance. It trades about 0.13 of its potential returns per unit of risk. Goosehead Insurance is currently generating about 0.02 per unit of risk. If you would invest  24,927  in Asbury Automotive Group on October 26, 2024 and sell it today you would earn a total of  1,042  from holding Asbury Automotive Group or generate 4.18% 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.  Goosehead Insurance

Asbury Automotive

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 10 (%) 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.

Goosehead Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goosehead Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Goosehead Insurance is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Asbury Automotive and Goosehead Insurance

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

The idea behind Asbury Automotive Group and Goosehead Insurance 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.