Correlation Between Asbury Automotive and Henderson Investment

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

Diversification Opportunities for Asbury Automotive and Henderson Investment

0.07

Correlation Coefficient

Asbury Automotive  Henderson Investment

Significant diversification

The 3 months correlation between Asbury and Henderson is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Henderson Investment Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henderson Investment 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 Henderson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henderson Investment has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Henderson Investment go up and down completely randomly.

Pair Corralation between Asbury Automotive and Henderson Investment

Considering the 90-day investment horizon Asbury Automotive Group is expected to generate 0.09 times more return on investment than Henderson Investment. However, Asbury Automotive Group is 11.39 times less risky than Henderson Investment. It trades about -0.2 of its potential returns per unit of risk. Henderson Investment Ltd is currently generating about -0.22 per unit of risk. If you would invest  25,563  in Asbury Automotive Group on October 12, 2024 and sell it today you would lose (1,364) from holding Asbury Automotive Group or give up 5.34% of portfolio value over 90 days.

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

Asbury Automotive Group  vs.  Henderson Investment Ltd

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.

Henderson Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henderson Investment Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Asbury Automotive and Henderson Investment

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

The idea behind Asbury Automotive Group and Henderson Investment Ltd 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.